All 19 Parliamentary debates in the Lords on 26th Mar 2024

Grand Committee

Tuesday 26th March 2024

(4 months ago)

Grand Committee
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Tuesday 26 March 2024

Arrangement of Business

Tuesday 26th March 2024

(4 months ago)

Grand Committee
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Announcement
15:45
Baroness Pitkeathley Portrait The Deputy Chairman of Committees (Baroness Pitkeathley) (Lab)
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My Lords, although we do not anticipate it this afternoon, your Lordships will know that, if there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.

Occupational Pension Schemes (Funding and Investment Strategy and Amendment) Regulations 2024

Tuesday 26th March 2024

(4 months ago)

Grand Committee
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Considered in Grand Committee
15:45
Moved by
Viscount Younger of Leckie Portrait Viscount Younger of Leckie
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That the Grand Committee do consider the Occupational Pension Schemes (Funding and Investment Strategy and Amendment) Regulations 2024.

Relevant document: 17th Report from the Secondary Legislation Scrutiny Committee

Viscount Younger of Leckie Portrait The Parliamentary Under-Secretary of State, Department for Work and Pensions (Viscount Younger of Leckie) (Con)
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My Lords, these regulations were relaid before the House on 26 February. They bring in new measures that will support trustees and sponsoring employers of defined benefit occupational pension schemes to plan and manage their scheme’s funding over the longer term. The aim of the regulations is to achieve a fair and long-lasting balance between providing security for members of defined benefit schemes and affordability for the sponsoring employer.

I start by giving a bit of background. The UK has the third-largest pension system in the world, with assets of around £2 trillion held in both defined contribution and defined benefit schemes. The pensions sector is an integral part of the UK economy. I will focus on defined benefit pensions and these regulations. Over the last decade, across the Organization for Economic Cooperation and Development, the UK has seen the greatest improvement in defined benefit funding.

There are around 5,000 defined benefit schemes in the UK, and around 9 million people who depend on these pensions when they retire. Defined benefit pension schemes, often referred to as DB schemes, are a promise that scheme members will receive a guaranteed income in retirement, usually paid monthly, for the rest of the member’s life. Between them, UK DB schemes have around £1.4 trillion of assets under management.

Most DB schemes are closed either to new members or to new accruals. This means that they have an increasing number of members who are retired or close to retirement, and either a decreasing number of members or no members at all who will make contributions to the scheme. This is referred to as “maturing” and will change the funding requirements of the scheme. It is therefore extremely important that employers and trustees work together to manage maturing schemes to ensure they can continue to pay members’ pensions.

DB funding levels have improved in recent years through a combination of employers supporting schemes and, more recently, changes to interest rates. The Work and Pensions Committee report on its DB schemes inquiry, published today, recognises the new opportunities and challenges this brings. But financial markets and economic conditions are changeable and funding positions can quickly deteriorate. The Government will respond to the Work and Pensions Committee report in due course, but I reassure noble Lords that these regulations are designed to provide a solid foundation across current and future economic and market environments. This is good news for schemes, members and sponsoring employers, and for the UK economy.

The majority of DB schemes are well managed and supported by their sponsoring employers, but some schemes are not as well run, or are taking an inappropriate level of risk in their approach to investment and funding. This can lead to funding problems developing. Over a quarter of all DB schemes are in deficit on a technical provisions basis. This means that they have a deficit which will need to be repaired to ensure that members get their promised pensions when they are due to be paid—hence the regulations we are debating today.

The regulations build on the current funding regime for DB schemes, embed good practice and provide clearer funding standards. This will help ensure that all DB members have the best possible prospect of getting the benefits they have worked so hard to build paid in full when they fall due.

The consultation attached to these regulations built on extensive discussion, engagement and consultation with the pensions industry going back as far as 2017. This joined-up working is ongoing, with the development of the Pensions Regulator’s draft code of practice through to its most recent consultation on the statement of strategy. We had good engagement with the consultation: 92 responses from a wide variety of organisations across the pensions industry. The industry broadly welcomed the draft regulations but expressed some concerns that they were too prescriptive and could be improved for schemes open to new accrual. We listened, and the regulations before us today take account of that.

A key aspect of this work was the importance of balancing, on the one hand, clear standards for both open and maturing schemes that reflect the best practices that most schemes already follow and, on the other, ensuring that individual schemes have the flexibility to make funding decisions that best suit their own unique circumstances. Also, schemes must continue to be affordable for their sponsoring employers and to pay out all pensions as they fall due. Importantly, we aim to promote better collaboration between sponsors and trustees in the formulation of an overall journey plan. This includes an investment approach that reflects the scheme’s circumstances.

The Pension Schemes Act 2021 introduced new scheme funding requirements for DB schemes and requires DB scheme trustees to prepare a statement setting out the scheme’s funding and investment strategy, which must be submitted to the Pensions Regulator. These regulations are principle-based and set out detailed requirements for the funding and investment strategy. Better information and clearer funding standards will help address the problems the Pensions Regulator has faced in the past and will enable it to be more effective, efficient and proactive in carrying out its statutory functions.

As part of this strategy, all DB schemes will be required to set out their plans for how pension benefits will be paid over the long term. For example, this could be through buyout with an insurer, by entering a superfund or by running on with continued employer support. The strength of this employer support is fundamental. For the first time, these regulations introduce key principles for assessing the strength of the employer covenant. This is an assessment of the financial ability of the employer in relation to its legal requirements to support the scheme.

Schemes are required to have a clear plan along their glide path to maturity and low dependency, so as not to need further employer support by the time they are significantly mature. Schemes are required to reach low employer dependency in reasonably foreseeable circumstances. This embeds existing good practice that funding risks taken by a scheme before they reach maturity must be supportable by the employer, while providing explicitly for open schemes to support more risk, because there is more time for them to address any funding shortfalls.

The best possible protection for a DB member is to be supported by a strong and profitable employer. That is why we have made it clear that recovery plans are to be put in place as soon as the employer can reasonably afford, but this does not mean that the employer must put every free penny into the scheme to the detriment of its growth and other commitments. We believe that this sets an appropriate and sustainable balance while ensuring that schemes get a fair share of available resources.

The funding and investment strategy must be reviewed and, if necessary, revised, alongside each scheme valuation, which is usually every three years. When submitted to the Pensions Regulator, these valuations will be accompanied by a statement of strategy. This will articulate the trustees’ approach to long-term planning and management, as well as their assessment of the implementation of the funding strategy, key risks and mitigations and any lessons learned. Depending on circumstances, the Pensions Regulator now has the flexibility to ask for less detailed information from the schemes to improve long-term planning and avoid unnecessary burdens.

These regulations help drive the Government’s vision to encourage schemes to invest in ways that are productive for the UK economy. They make it clear that schemes have significant flexibility to choose investments while meeting the low-dependency principle. This will help support trustees in reacting to changing circumstances while investing in the best interests of their members.

The pensions industry has welcomed these revised regulations, which are explicitly more accommodating of risk taking, where supported by the employer covenant. They increase the scope for scheme-specific flexibility, including allowing open schemes to take account of new entrants and future accrual when determining when the scheme will reach significant maturity. The Pensions and Lifetime Savings Association recently commented that this is

“a significant set of ‘win’”

for its members.

I move on to the timing of these regulations. They will come into force on 6 April 2024 and a scheme must have a funding and investment strategy within 15 months of the effective date of the first actuarial valuation obtained on or after 22 September 2024. We intend that the Pensions Regulator’s funding code will be laid before Parliament this summer. The regulations, the code and guidance will work in partnership. These regulations will encourage the widespread adoption of existing good practice and help the regulator to intervene more effectively to protect members’ benefits.

I am confident that the Occupational Pension Schemes (Funding and Investment Strategy and Amendment) Regulations 2024 will support schemes and employers to make long-term plans and enable the Pensions Regulator to take effective action when needed. This will help ensure that scheme members get the retirement they have contributed towards and rightly expect. In my view, the provisions in these regulations are compatible with the European Convention on Human Rights. I commend the regulations to the Committee and beg to move.

Lord Palmer of Childs Hill Portrait Lord Palmer of Childs Hill (LD)
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My Lords, I thank the noble Viscount very much for his normal exposition. I am sure that we will hear a lot more detail from other participants. I will confine myself to some questions rather than go through this large document, which the noble Viscount did not go through in great detail.

First, is there a disproportionate governance burden for small firms? I was worried about how small firms will be able to cope with these new regulations. Secondly, the resolutions will add to the duties of defined benefit schemes. Can the noble Viscount elaborate on how these duties will be dealt with? Thirdly, will the regulations help set out long-term objectives? I was a bit worried about comments that these schemes are all coming to an end and that we are just relying on people sitting in place on the schemes and very few new people, if any, coming in.

Is there a conflict—I could not answer this myself—between the beneficiaries and the employers? The noble Viscount used the phrase “fair balance”. I am not sure that this conflict shows a fair balance. On the duty of trustees to protect the interests of the beneficiaries, can we rely on all these trustees to do so, especially when the schemes are, in effect, stationary and being wound up? Also, there is the impact of the fund being hived off to insurance companies. These funds are hived off so often; will the beneficiaries’ interests really be protected? I think that will be their worry.

Finally, the noble Viscount talked about actuarial valuations. So often they mean that funds keep moneys in reserve, probably more than a commercial firm would have to. Can he comment on that? It is very nice and careful that they do so, but sometimes that might have a negative impact on the beneficiaries. I hope he can give me some answers to those numerous questions.

16:00
Baroness Drake Portrait Baroness Drake (Lab)
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I thank the Minister for the clarity of his presentation—this is a complex set of regulations—and for the briefing session that he arranged for Peers, where I was able to ask quite a lot of questions. I support these regulations but I want to take this opportunity to ask three questions.

The regulations were preceded by a government consultation on an original draft, which was amended post the LDI crisis and in the wake of the Mansion House productive finance proposals. Importantly, these regulations remove an uncertainty as to whether the DWP would qualify a trustee’s independence to make investment decisions as they make it clear that trustees will retain the power to decide how to invest the scheme’s assets. That is welcome; otherwise, it would have significantly weakened the trustee’s powers to protect scheme members. Is not intervening on a trustee’s independence to make investment decisions now settled policy? Also, is any consideration being given to granting additional powers to the Pensions Regulator to override investment decisions when it is oversighting a scheme’s funding and investment strategy?

Secondly, the regulations now allow greater flexibility in investments and risk-taking than was originally proposed in the first draft, were it supportable. The DWP has made amendments to avoid, to use the Government’s own phrase, things that “inadvertently drive reckless prudence” —that sounds like an oxymoron—“and inappropriate risk aversion”. As the Minister said, it is now explicit that open schemes can take account of new entrants and future accrual when determining when the scheme will reach significant maturity; this gives them greater scope for scheme-specific flexibility.

However, I note that these regulations also no longer require schemes of significant maturity that are making low-dependency investment allocation broadly to match cash flow from investment with schemes’ liabilities. The Government have made it clear that schemes can invest a reasonable amount in a wide range of assets beyond government and corporate bonds, even after significant maturity has been reached—for example, when the scheme’s years to duration of liabilities is around only five to 15. The DWP has explicitly removed the original draft Regulation 5(2)(a), which required in schemes of significant maturity that assets be invested in such a way that cash flow from investments broadly matched the payment of pensions under the scheme.

Why, when a scheme has reached significant maturity, would retaining the requirement that assets be invested in such a way that cash flow from the investments broadly matches the payment of pensions be considered “reckless prudence” or “inappropriate risk aversion”—the premise on which the original draft Regulation 5(2)(a) was withdrawn? When a scheme is in significant maturity, you need prudence and risk aversion because of the need for cash flow. In fact, in many closed DC schemes, the alignment of employers’ desire to remove DB liabilities and volatility from their balance sheets with trustees’ desire to protect benefits over the long term is increasingly leading to investments held broadly matching liabilities, as well as to consideration of a path to buy- out and buy-in for many schemes. It is rather rowing against what is happening in many instances. I fear that greater flexibility of access to surplus may not provide a sufficient incentive for schemes to change their course.

This is my third and final point. The requirement to assess the current and future development and resilience of the employer covenant is now on a legal basis and has to be embedded in the funding and investment strategy agreed by employers and trustees, which is welcome. It reflects the increasing importance given to covenants by trustees but the assessment of an employer covenant can be contested ground between employer and trustee, particularly where there is a question of whether there has been a material change to the strength of the employer covenant. Given this novel legal territory, which is of itself welcome, what powers does the regulator have to address such disagreements of view between the trustee and employer on the covenant, given that they have to agree them in order to proceed with a funding and investment strategy? How, if there are disagreements—and there could well be—will the regulator address those?

Lord Davies of Brixton Portrait Lord Davies of Brixton (Lab)
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I need to tell the Committee that I have an interest to declare: I am a fellow of the Institute of Actuaries. However, I should add—with some emphasis—that nothing of what I will say subsequently must be regarded as actuarial advice. It might sound like actuarial advice but I assure noble Lords that it is not. I speak from my experience as a scheme actuary having undertaken scheme valuations, including those under the TPR or previous iterations of where we are.

Unfortunately, I was unable to attend the briefing session due to other business in the House. It might have been better if I had attended because I have reservations about these regulations. They are going to go through and be implemented but, in expressing some doubts, I trust that it will affect the environment in which they are implemented.

In this context, we have to acknowledge the report published today by the House of Commons Work and Pensions Committee—Defined Benefit Pension Scheme, its third report of the 2023-24 Session—which comments in some detail on the role and functioning of the TPR. I want to take this opportunity to highlight some of the report, in which doubts are expressed about the way the TPR operates. For example, Mary Starks undertook an independent review of the TPR and said:

“TPR’s statutory objective to minimise calls on the PPF may drive it to be overly risk averse, particularly given the PPF’s strong funding position”.


I will return to that.

Other comments are that the TPR’s objectives have not changed to reflect the significant changes that there have been in the defined benefit landscape. The concept of excessive prudence is widely held within the pensions industry. The PLSA, the Pensions and Lifetime Savings Association, says that

“it would be helpful to give TPR a greater focus on member outcomes as a whole”,

while the Railways Pension Scheme trustee corporation suggested that an objective should be made explicitly to

“protect and promote the provision of past and future service benefits under occupational pension schemes of, or in respect of, members of such schemes”.

So there is a significant train of thought coming from the industry that the TPR has failed to acknowledge its role in pension provision.

A particular problem highlighted in the first comment is the position of the PPF, the Pension Protection Fund. In giving evidence to the Select Committee, its chief executive, Oliver Morley, said that the objective of the TPR to protect the PPF was

“looking a bit anachronistic now, given the scale of the reserves and the funding level”.

I am not asking the Committee to accept or endorse these comments at the moment but, at the very least, they emphasise that the role of the TPR is a matter of detailed discussion. The regulations before us are firmly within a concept of its role, which many commentators now say is outdated. I have held this view for some time; it is good to see that it is now accepted more widely.

This was the conclusion of the Select Committee:

“TPR’s approach to scheme funding has been driven by its objective to protect the PPF. We agree with those who told us that the objective now looks redundant, given the PPF has £12 billion in reserves”.


As I said, this is at the very least an issue that should be confronted, but it is not confronted by the regulations before us. The regulations are patently too prescriptive. The details that they require are not directed at the objective of protecting members’ benefits but are about establishing a system where box-ticking will take priority over the longer term and broader interests of scheme members.

I have also argued for some time that the TPR misunderstands its role. There is a sort of assumption in its thinking that the calculation of technical provisions represents the best valuation basis. New readers may well find that this is getting into deep water but the point is that the actuary who undertakes the valuation at the request of the trustees must comply with the appropriate professional standard: Technical Actuarial Standard 300. This is the latest version, coming into effect in April.

It is notable that these requirements, which any actuary valuing the solvency of a pension fund should follow, do not mention technical provisions. In essence, the technical provisions are there to trigger action by the regulator; they are not there to substitute for the scheme actuary’s solvency valuation. We have what is in effect a dual basis. The scheme actuary working for the trustees will advise what they believe to be the appropriate contribution rate. Parallel to that, there is the system of technical provisions that, if triggered, require a separate valuation to be undertaken to calculate the recovery plan.

They are quite separate operations but the TPR consistently confuses the two. The end result is that, by overemphasising the role of technical provisions, schemes are being forced into this problem of excessive care, or excessive protection, of the members. It is not at all clear to me that this bureaucratic overweight on the operation of pension schemes ultimately favours the members in any way. In effect, it forces schemes—LPI is just one example—to invest in gilts, which is bad for members; there is no question about that. It is good for the Pension Protection Fund, and good for a Government who are concerned about being held up as not caring about the protection of members, but members’ benefits are drawn from the scheme so the scheme should be funded in accordance with the actuarial solvency standards, as set out by the Financial Reporting Council.

16:15
For example, these regulations, together with the guidance note that will follow from TPR, effectively enforce undertaking valuations on what is known as a gilts-plus basis. That fails to recognise the breadth of investment opportunities that are available to a pension scheme, which ultimately will benefit the members through providing adequate levels of return and benefits.
Another example is the issue raised earlier about burdens on small schemes. Schemes with fewer than 100 members do not have to comply in full because of the way the system works. That excludes only 1% of assets from the regulatory regime. If the provisions applied only to schemes with more than 1,000 members, the number of schemes that would be required to comply with this onerous burden would be increased to 20%. The gearing between large schemes and small schemes is substantial.
There are questions about the regulations and about how the way in which TPR implements them creates problems for schemes. I just highlight these issues as we will have to return to them as and when the regulations are implemented and TPR’s guidance is issued in due course.
Baroness Sherlock Portrait Baroness Sherlock (Lab)
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My Lords, I thank the Minister for his introduction to these regulations and all noble Lords who have spoken for their contributions. I should perhaps say that nothing in my speeches should ever be taken as actuarial advice or indeed advice of any kind, unless you have money to burn. As we have heard, these regulations implement significant changes to the DB scheme-specific funding requirements in association with the revised DB funding code. I will go through what I understand them to be doing—I invite the Minister to correct me if I have it wrong—and I have some questions.

The changes are driven by the recognition that most DB schemes are closed to future accruals and are maturing, which makes the longer-term strategic management of them important if members are to make sure they get their benefits in full when they fall due. The key principles underpinning the changes are a requirement for schemes to be in a state of low dependency on their sponsoring employer by the time they significantly mature, and better trustee engagement and better understanding and accountability between trustees and the regulator.

The regulations require trustees to agree a funding and investment strategy—an FIS—with the sponsoring employer, which will set out that longer-term funding objective and how it will be achieved over the lifespan of the scheme. Schedule 1 then sets out the matters and principles that trustees must have regard to in setting their FIS, and that they have to think about liquidity and unexpected requirements on the journey and after significant maturity, including the strength of the employer covenant, which I will come back to in a moment.

The trustees have to consult the employer on a statement of strategy on progress in achieving their FIS. In the absence of a Keeling schedule—I confess I am slightly obsessed with them—I went back to the Pensions Act 2004. Section 221B states that

“trustees or managers must, as soon as reasonably practicable after determining or revising the scheme’s funding and investment strategy, prepare a written statement of … the scheme’s funding and investment strategy, and … the supplementary matters set out in subsection (2)”.

Paragraphs (a) to (c) of Section 221B(2) say that the supplementary matters are: the extent to which trustees or managers think the funding and investment strategy is being successfully implemented, and if not, what they will do about it; the main risks faced by the scheme in implementing the funding investment strategy and what they are doing about the risks; and their reflections on past decisions and lessons learned. Paragraph (d) adds:

“such other matters as may be prescribed”.

These matters are now prescribed because they are defined by Schedule 2 to these regulations, which specifies the information to be covered in the strategy statement.

I assume this means that TPR will now have discretion on the level of detail it can request from a scheme in relation to the supplementary matters. Otherwise, without that discretion, it would have to rely on its existing powers and the setting of the clearer funding standards in these regulations. Is that a correct assumption? How will the DWP monitor whether the regulator is delivering that higher level of probability for which it is shooting? Are the Government leaving the door open to the prospect of increasing the regulator’s powers? That is an interesting one.

To return to the covenant, Regulation 7 puts the employer covenant assessment on a formal legal footing for the first time. The covenant now appears to be central to the new regulatory framework, rather than being left for the regulator to cover in the code. I presume the intention is for this to be an area of increased focus for trustees. This is welcome, given the increasing importance of covenant strength to the decisions made by trustees, although I suspect the law is catching up with trustee thinking as much as driving it.

However, getting access to enough information to assess the employer covenant is not always easy, and trustees and employers may not always align in their view of the strength of the covenant. The Minister mentioned that change can come quickly. We live in a world where changing markets and the impact of technology, mergers and acquisitions, leveraging and new creditors can all make a material difference to the strength of the covenant in pretty short order. The same forces can also reduce trustee confidence in the strength of the covenant in the longer term.

Regulation 7 requires trustees to assess the strength of the employer covenant, looking at current and future developments and the resilience of the business when they are setting or revising the FIS. As the Minister mentioned, funding deficits must be addressed

“as soon as the employer can reasonably afford”.

But we are also told that the impact on the sustainable growth of the business must be taken into account. Does that not put the trustee in the position of being faced with a push-me pull-you set of regulatory requirements, where the two are pulling in different directions?

Trustees will be required to seek more detailed information from the employer regarding its business. The regulator will provide updated guidance on the covenant, which will set out its expectations of both employers and trustees, and the regulations will clearly require trustees and employers to work more collaboratively in future. I have two questions about this, following the issue flagged up by my noble friend Lady Drake. Because placing the assessment of an employer covenant on a legal basis is novel, we need the Minister to make it clear how the regulator will resolve disagreements between trustees and employers on the current and future strength of the covenant, where that is inhibiting agreement on the FIS. If they cannot agree on the FIS because of different views on the strength of that, what will the regulator do about it? Secondly, will the regulator be able to impose its own view of the covenant on trustees?

Regulation 16 strengthens the requirements on the chair in respect of the strategy statement. It seems that the code has been drafted in a manner which assumes that chairs of trustees are appointed by the trustee board. I believe that there are still occupational schemes where the appointment of the chair is wholly the decision of the employer. Does this carry any implications for the requirements placed on chairs appointed in that way?

The costs incurred by trustees, which are funded by employers, will inevitably increase as a result of this. I am quite sure that the Minister will have read the 13th report of the Secondary Legislation Scrutiny Committee. I will not read it out in detail, but it points out the DWP’s assessment that about 16% of DB schemes had deficits in March 2023. It says:

“The Impact Assessment … claims that, as a result of these Regulations, DB schemes’ aggregate ‘deficit reduction contributions’ could be around £0.26 billion lower over the 10-year period compared to the current situation”.


It goes on to point out a range of issues around this, but what interests me is this:

“We note … that the IA states that it is based on data from March 2021, ‘therefore more recent market developments (particularly the rise in interest rates and gilt yields which impacted the estimated liabilities) are not captured in the modelling.’ In the light of market volatility, the House may wish to explore how robust DWP’s assumptions are about the potential benefits of these Regulations”.


I do not have a dog in this fight, but could the Minister put a response to that on the record? What assurances can he give the Committee in response to the concerns of the Secondary Legislation Scrutiny Committee?

Another point was made by that committee in its 17th report. I think the Minister indicated—or maybe he did not; I cannot remember—that this is a revised version of an instrument originally laid on 29 January. The DWP had to amend the content to amend the commencement date of one of the provisions to ensure that it aligned with the policy intention. Yet again, for the record I note a disappointment that once again we are having another instrument laid because of errors made in the original that needed to be corrected. It is becoming a bit of a pattern, I am afraid. But in this case, it provides us with an opportunity. In its 17th report, the SLSC said at paragraph 7:

“Our 13th Report of this session provided the House with extensive supplementary information on how the obligation is intended to work, and we are disappointed that DWP did not take this opportunity to improve its Explanatory Memorandum”.


Can the Minister explain to the Committee why the Government did not take that opportunity afforded to them by the need to reissue the instrument?

I have two quick points to make that were raised by other Members. First, on the Work and Pensions Select Committee report, the Minister said that the Government would respond to that in due course. I recognise that it has only just come out and they will not be able to. However, there is one point that would be helpful in particular—they will already have thought about this—which is that the committee raised the position of open schemes and relayed concerns that, despite some of the changes that had been made, some open schemes still thought that the new regime could require them to de-risk prematurely. Are the Government confident that they have landed in the right space on this?

Secondly, my noble friend Lady Drake asked a very important question about the regime governing investment by schemes that have reached significant maturity, essentially about whether they will no longer be required to balance cash from investments and liabilities going out. It would be very helpful if we could know about both of those.

I apologise to the Minister that I have, yet again, asked a number of questions, but I am grateful and look forward to his reply.

Viscount Younger of Leckie Portrait Viscount Younger of Leckie (Con)
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My Lords, I thank all those who have spoken in this short debate. As usual, there were a number of specific and quite technical questions, notably from the noble Baroness, Lady Sherlock. I shall do my best to answer them. I think that some of them may be included in some of my rounding-up answers to other questions—but, as she will expect me to, I shall write a letter copying in all Peers if I fail to answer all of them.

Just on the question that the noble Baroness raised about the draft regulations, we outlined in the consultation response, as she alluded to, on 26 January 2024, that we would legislate for the regulations to come into force from April 2024, applying to scheme valuations from September 2024. That recognised feedback through the consultation about the need to give the pensions industry sufficient time to prepare before the requirements took effect. The regulations as drafted meant that one component of the reforms, the recovery plans, would come into effect on 6 April 2024 and not 22 September 2024. Since laying the regulations, we have recognised that this has the potential to cause confusion and additional administrative requirements for schemes. That is why we withdrew the regulations and relaid a revised version.

For clarity, we made two changes to the regulations. The first amendment was to ensure that the changes to recovery plans took effect only when the effective date of the actuarial valuation to which the recovery plan relates is on or after 22 September 2024. The second, in light of the first, is to clarify that changes which relate to actuarial valuations and reports also apply only on or after 22 September 2024. I reassure the noble Baroness that no other changes were made. These changes restate our intention to give sponsoring employers, scheme trustees and managers the same amount of time to prepare for the new requirements in the recovery plan.

I do not believe that I have an answer to the Explanatory Memorandum question, but I shall see whether I can address that before my remarks have concluded.

16:30
Let me say at the outset that it is important that defined benefit pension schemes are well managed and properly funded for the long term, and that schemes and their sponsoring employers have the best possible support to manage their funding and investment decisions. As I said in my opening speech, these regulations will make sure that DB pension schemes are following best practice and looking forward towards their long-term outlook. They will ensure that schemes are doing the best they can to deliver the promised pensions to the people who depend on them in retirement while giving schemes the flexibility that they need to suit their own individual circumstances. As it has been a theme of this debate, I stress that last point about flexibility; I know that it was an area of particular concern to the pensions industry during the consultation. I am happy to confirm again that flexibility will continue to be a key feature of the new regime.
I will dive straight into the questions asked. The noble Lord, Lord Palmer, asked whether the regulations impose a disproportionate administrative burden and cost compliance. That is a fair question. The requirement to determine and review a funding and investment strategy alongside each actuarial valuation, as well as the requirement to prepare a statement of strategy and send it to the TPR, will undoubtedly impose some additional burden on DB schemes. However, most schemes that are well managed will already be planning for the long term and managing their risks effectively; for many, the additional burden of compliance with these regulations is likely to be pretty minimal.
We have sought to ensure that the information to be provided on the statement of strategy is limited to that needed by the TPR. The regulations provide discretion for the regulator to ask for less detail from some schemes. We have also taken the opportunity to eliminate duplication in existing arrangements for schemes to provide a summary of the actuarial valuation. It may be helpful to the noble Lord to know that schemes face an average of £7,000 in implementation costs and £1,100 in ongoing costs, although these costs may of course vary from one scheme to the next. We would argue that this is a small cost relative to the £1.4 trillion in aggregate assets held by DB schemes.
The noble Lord, Lord Palmer, and the noble Baroness, Lady Drake, asked about the regulations changing the balance of power. It is important that sponsoring employers are involved in the DB scheme’s long-term funding and investment strategy because the employer is responsible for funding it. The regulations do not undermine the independence of scheme trustees, who will continue to invest in the best interests of members in line with their fiduciary duties. Although trustees must take account of the objective that, on and after the relevant date, the assets are invested, in accordance with a low-dependency investment allocation, the actual scheme investments may diverge from this. This ensures that the sponsor employer agrees the long-term funding targets but, importantly, that it continues to offer trustees the independence they need to invest scheme funds in the best way possible and, of course, in the interests of the scheme members.
The noble Lords, Lord Davies and Lord Palmer, asked about the new measures and how we will ensure that they do not result in a disproportionate governance burden for small schemes. As I mentioned earlier, the TPR operates a risk-based approach to the supervision and regulation of schemes; it will be proportionate in its approach to regulating smaller schemes. These regulations provide the regulator with discretion to ask for less detail from some schemes, which will enable it to operate the fast-track approach. The regulator intends to make some adjustments to what data small schemes must provide to reduce the burden on them. It is currently consulting with industry on data submissions and how to ensure such a proportionate approach.
Our impact assessment acknowledged that small or micro schemes are less likely to be following some of the proposed standards already. Therefore, they may incur extra costs. As the sponsoring employer will be responsible for additional costs, this may increase costs to smaller businesses, but it should be remembered that not all small schemes are supported by small businesses: data shows that DB schemes are now generally run by larger employers as a pooling process. Data from the TPR indicates that most small schemes are well funded, with those with fewer than 100 members having an aggregate funding ratio of 112%, on a technical provisions basis; those figures are as at March 2023.
I turn to TPR and the questions asked by the noble Baronesses, Lady Sherlock and Lady Drake, on its powers, looking ahead to when all the pieces of the new funding regime are in place. The Pensions Regulator will continue to be proportionate in its approach and take account of the circumstances of each scheme when supervising and regulating pension schemes. Although neither Ministers nor officials can become involved in the regulator’s decisions on whether to exercise its powers, my department has oversight of its performance. This oversight is exercised formally through the approval of its business plans and strategies and quarterly accountability reviews, and is augmented by regular informal dialogue and engagement.
The noble Baroness, Lady Drake, made a point about lack of powers and asked what enforcement powers the Pensions Regulator has to address non-compliance. The Pensions Regulator has significant powers under Section 231 of the Pensions Act 2004 to correct funding arrangements in certain circumstances. The existing powers have been extended to include failure to comply with the requirements for preparing a funding and investment strategy. It is important for there to be a sufficiently high bar to ensure that TPR’s Section 231 funding powers are used appropriately and fairly. Although enforceability is an important objective, TPR will aim to be proportionate and targeted in respect of enforcement. In addition to Section 231, TPR has other powers that it can use in DB funding cases where there is a breach of legislation, including information-gathering powers to gather evidence, improvement notices and Section 10 financial penalties.
The noble Lord, Lord Davies of Brixton, made the point that TPR might be too risk averse. Perhaps I can reassure him by saying that TPR, which he will know more about than me, operates on a risk-based and outcome-focused approach when it comes to the supervising and regulating of pension schemes. It will continue to be proportionate in its approach and will take into account the circumstances of each scheme, including, as I mentioned earlier, smaller schemes. I have covered the fast-track approach on that.
The noble Baroness, Lady Drake, asked about duration of liabilities. We want the funding and investment strategy to provide a stable framework for long-term planning and to be regularly reviewed. We do not want excessive revisions driven by the volatility of the method used to measure maturity. The Government acknowledge that the duration of liabilities measure is sensitive to economic conditions, so these regulations require the economic assumptions used to calculate this duration to be based on the economic conditions prevailing on 31 March 2023. The TPR will remodel the duration of liabilities at which schemes will reach significant maturity using the economic conditions on 31 March 2023. It will not be the 12 years’ duration proposed in its draft DB funding code, which was based on different economic circumstances. Although different measures of maturity have advantages and disadvantages, they can all be sensitive to economic volatility; on balance, we continue to believe that the duration of liabilities measure is the best option.
The noble Baroness, Lady Drake, asked about trustees and their roles, including what happens if trustees and employers fail to agree a funding approach. We expect and encourage sponsor employers and scheme trustees to have positive discussions to agree their funding and investment strategy. In situations where a suitable funding and investment strategy has not been agreed between the two, the regulator will encourage and assist them to work together to agree their strategy. If there is still no agreement, the regulator can take enforcement action. It will have the power to set a funding and investment strategy for them or may take other enforcement action depending on the circumstances. This can range from appointing a trustee to a scheme to enable it to be run effectively through to issuing fines where that is considered appropriate. However, I would argue that that would be pretty extreme.
The noble Baroness, Lady Sherlock, asked whether the regulator will be able to impose its own view on the covenant. I assure her that further detail will be set out in the code and covenant guidance and that the code will be published this summer. As she knows, this will come into force on 22 September 2024.
In opening this debate, I mentioned that these regulations will help schemes to invest more productively to the benefit of members, sponsoring employers and the UK economy as a whole. My department’s impact assessment estimates that the regulations could provide a greater incentive for almost 1,400 schemes to invest more productively. This could potentially unlock up to £5 billion of further investment in private equity and venture capital. Indeed, analysis from the TPR shows that most schemes already have headroom for more productive investments and that perhaps between 70% and 75% of schemes can invest more productively. This means that, where appropriate, schemes can invest in a wider range of long-term, return-seeking assets. The aim is that the scheme assets will be working harder for all stakeholders while, importantly, keeping members’ pension benefits secure.
Certain questions were asked in this area, in particular by the noble Lord, Lord Davies. He asked about forced investment into gilts. As DB schemes mature, they generally invest a growing proportion of funds in more secure assets, such as bonds and gilts, to protect their funding position and to ensure that they have sufficient funds to pay the increasing number of pensioner members when benefits are due. Most DB schemes are maturing and there has already been a significant shift to a higher proportion of investments in more secure assets. At the end of March 2023, around 70% of all DB funds were invested in bonds. We do not believe that these regulations will drive further overall de-risking of DB scheme investments or increase systemic risk by driving more investment in bonds. I hope that the noble Lord agrees with that.
The noble Baroness, Lady Sherlock, asked about the covenant. Her question was: is it a weakness and where is the bite? That was the gist, I think. She is looking a bit puzzled. Even if that was not the question, I am still going to give the answer. This is the first time that the employer covenant has been defined in regulations. The regulations provide clarity on what must be considered when assessing the employer covenant as a key underpin for supportable risk. For most, this will simply be embedding current good practice. The Pensions Regulator will set out clear expectations on the provision of information from employers to trustees in order to enable them to assess the employer covenant.
There are probably questions that I have not addressed. I will certainly look very closely at Hansard and will be sure to answer any outstanding questions. Before I conclude, I think the noble Baroness has a question.
Baroness Sherlock Portrait Baroness Sherlock (Lab)
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I fully accept that some of these questions may have been technical and that the Minister may need to write but, in the case of one question that I asked, I would fully expect him to have come able to answer. The Secondary Legislation Scrutiny Committee took a lot of time taking these regulations apart. It made a number of recommendations and made comments about the Explanatory Memorandum. I fully accept the Minister’s explanation as to why the instrument was relaid—that makes absolute sense—but the committee explicitly asked why the DWP did not take advantage of the opportunity of having to relay the instrument to improve the Explanatory Memorandum. I know that he will have read the report, as I know he holds the committee in high regard, so I am sure that he came briefed and able to answer the question of why the department did not respond to that recommendation. Could he just answer that for us?

Viscount Younger of Leckie Portrait Viscount Younger of Leckie (Con)
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Yes, I will do my best to do so. Regarding the Explanatory Memorandum, as outlined, because the changes here were focused on clarifying the date on which the regulations came into effect, the changes to the Explanatory Memorandum were limited to reflect the change. We shall note the feedback for future SIs. That is my answer but let me reflect on it; I might well be able to enhance it in the letter that I am clearly going to have to write.

Baroness Sherlock Portrait Baroness Sherlock (Lab)
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I will not interrupt further but, just to clarify the question, the point the committee was making was not that the Explanatory Memorandum needed to be changed to reflect the changes in the instrument itself. It was that, since the department was having to relay the whole thing, why not take the opportunity to do a better job of the EM? That is all.

Viscount Younger of Leckie Portrait Viscount Younger of Leckie (Con)
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Absolutely. I think I have already indicated that lessons have been learned. From my point of view, I regret that we fell down on the Explanatory Memorandum and that we had to relay the regulations. Just for the record, I wanted to say that.

With that, I hope that we can take these regulations forward.

Motion agreed.

Renewable Transport Fuel Obligations (Amendment) Order 2024

Tuesday 26th March 2024

(4 months ago)

Grand Committee
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Considered in Grand Committee
16:46
Moved by
Lord Davies of Gower Portrait Lord Davies of Gower
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That the Grand Committee do consider the Renewable Transport Fuel Obligations (Amendment) Order 2024.

Relevant document: 16th Report from the Secondary Legislation Scrutiny Committee

Lord Davies of Gower Portrait The Parliamentary Under-Secretary of State, Department for Transport (Lord Davies of Gower) (Con)
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My Lords, this order would amend the Renewable Transport Fuel Obligations Order 2007 so that recycled carbon fuels, known as RCFs, are eligible for support under the renewable transport fuel obligation—RTFO—scheme.

The RTFO scheme establishes targets to drive the supply of renewable fuels. It does this by placing obligations on suppliers of transport fuel to ensure that renewable fuels make up a proportion of their overall supply. The amount of renewable fuel that should be supplied is calculated as a percentage of the volume of relevant fossil fuel supplied in a calendar year.

This obligation is met by acquiring certificates which are issued for the supply of sustainable renewable fuels. These certificates can be redeemed at the end of an obligation period, as well as traded between parties. The value of these certificates therefore provides a revenue stream for producers of renewable fuels and demand for their products in the fuel market. While the RTFO has operated successfully since 2008, it is important that it continues to evolve as new technologies and opportunities for emissions-reducing fuels are developed.

We committed to supporting RCFs in the Government’s transport decarbonisation plan and this statutory instrument delivers on that goal. It is the product of two consultations with industry and in-depth working with industry experts and across government departments. The instrument will help to maximise the greenhouse gas savings that can be achieved under the RTFO by broadening the available feedstocks for eligible fuels and encouraging the development of a new industry.

So what are these new fuels? RCFs are fuels produced from fossil wastes that cannot be avoided, reused or recycled, and have the potential to reduce greenhouse gas emissions relative to petrol, diesel or kerosene. To date, the RTFO scheme has supported only fuels produced from renewable feedstocks, such as biomass and renewable energy. However, emerging technologies and production methods mean it is possible for fuels produced from fossil wastes to contribute to emissions reductions to a similar degree to renewable fuels.

For example, wastes such as municipal solid waste—black binbag waste to most of us—can be processed using advanced techniques to form alternatives to fossil diesel and jet fuel. These fuels can provide significant greenhouse gas emissions savings compared with their alternative end-of-life fate, such as incineration in energy- from-waste plants.

Recent amendments to the Energy Act via last year’s Energy Bill permit RCFs to be included in the RTFO as well as other renewable transport support schemes, such as the forthcoming mandate for sustainable aviation fuels, provided they cause or contribute to a reduction in carbon emissions. The amendment to the Energy Act recognised that RCFs can play an important role in decarbonising different transport modes, including harder to electrify vehicles such as heavy goods vehicles and airliners.

Turning to the specific content of this SI, it amends the RTFO order to add wastes of fossil origin as an eligible feedstock for fuel production. Importantly, it also designates RCFs as a “development fuel”. These development fuels can be used to fill a sub-target in the RTFO designed to encourage the supply of novel and strategically important emerging technologies for fuel production. As a development fuel, qualifying RCFs also need to meet additional eligibility criteria in the order ensuring that only fuels that comply with existing fuel standards can qualify. This mitigates any air quality or compatibility concerns, as the fuels will in essence be chemically comparable with transport fuels already in use today.

This order will also allow RCFs to claim one development fuel certificate per litre of fuel supplied, which is half that of similar eligible renewable fuels. This is in recognition that truly renewable fuels remain more valuable, while still rewarding emissions savings from RCFs. To ensure that we mitigate any unintended consequences, the order also introduces detailed sustainability criteria. These ensure that support is provided only to fuels that are produced from genuine non-recyclable wastes and that they provide a saving on carbon emissions of at least 50% compared to traditional fossil fuels such as petrol and diesel. These criteria ensure that the policy complements the waste hierarchy and avoids incentivising the creation of wastes while still delivering emissions savings compared to the alternative likely end-of-life fate for different waste streams.

Why we are supporting RCFs? We expect that RCFs will have an important part to play in meeting our future emission reductions targets. Renewable fuels already contribute one-third of transport emissions reductions from the current carbon budget. Widening eligibility to include RCFs will ensure that such fuels can continue to make that important contribution as part of the transition to the electrification of road vehicles. Advanced fuels such as RCFs can generate significantly lower emissions compared to traditional fossil fuels.

The UK is leading the way in developing many of these technologies, supported by grant funding from the Department for Transport via the Future Fuels for Flight and Freight competition and, more recently, the Advanced Fuels Fund. Introducing RCFs into the RTFO now sets a helpful precedent for the forthcoming mandate for sustainable aviation fuel, which the Government have committed to introduce on 1 January 2025 and which will operate in a similar way, but for the aviation sector. Including RCFs in both schemes is important, as production processes mean that many facilities will produce both road fuel and SAF at the same time. Supporting RCFs under the RTFO will also increase the range of feedstocks eligible for support and encourage the innovation needed to increase the deployment of low-carbon fuels in harder to decarbonise vehicles such as heavy goods vehicles and airliners.

A further benefit of supporting RCFs is to provide a productive alternative for difficult to manage wastes. Examples of RCF feedstocks include unrecyclable, often contaminated plastics such as black bin bag waste. These wastes are currently mostly incinerated or sent to landfill. Processing them into fuels offers a more sustainable method of waste management. RCF production also utilises many of the same processes and technologies needed to be developed in order to increase the efficiency and capability of chemical recycling. Providing extra investment into these processes will therefore lead to wider waste management benefits in future.

In conclusion, as I have said, fuels supplied under the RTFO scheme currently deliver about one-third of all domestic transport carbon savings under current carbon budgets. However, it is vital that we expand the range of feedstocks we use if we are to continue to grow their contribution and meet our net-zero goal. RCFs have the potential to deliver emissions savings across the transport sector, while also supporting the efficient handling of wastes, and provide an opportunity for a valuable emerging UK industry, something I think we should all support. I beg to move.

Lord Ravensdale Portrait Lord Ravensdale (CB)
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My Lords, I declare my interests as set out in the register, particularly as a chief engineer working for AtkinsRéalis, an engineering consultancy, and as a co-chair of Legislators for Nuclear.

I very much welcome this statutory instrument, not least because I put forward and agreed with the Government the amendment to the Energy Act 2023 which gave them the primary powers to undertake this change. As the Minister said, recycled carbon fuels can provide significant carbon savings compared with traditional fossil fuels such as petrol, diesel and kerosene, and will save large quantities of carbon for hard-to-abate sectors. They will also enable RCFs as key near-term components of sustainable aviation fuels in the SAF mandate. Clearly, how these carbon savings are to be determined will be a key point in the implementation of these regulations, so can the Minister perhaps expand to the Committee on the detail of how this carbon savings process will be undertaken?

Secondly, the other part to my amendments to the Energy Act 2023 related to nuclear-derived fuels and enabling these to obtain support under the RTFO. These powers will be important in the near term for plans for hydrogen-powered construction vehicles and for hydrogen-powered buses at Sizewell, and in the medium term for the SAF mandate, given the unique characteristics of nuclear plants and their ability to produce hydrogen and synthetic fuels economically and at large volumes, leveraging the heat that they generate as well as electricity to generate large volumes of sustainable aviation fuel. Can the Minister perhaps update the Committee on when we will see a similar statutory instrument for nuclear-derived fuels, and indeed on the timescales of those associated consultations?

Finally, I highlight the need for cross-departmental working in this area, particularly on sustainable aviation fuels, which I know is already happening. There is a need for ministerial sponsorship of a senior-level, cross-Whitehall discussion, including the relevant departments, including the DESNZ, the DfT and the Treasury, to initiate those activities and dialogue on policy, funding and collaborations needed to unlock this SAF opportunity from recycled carbon fuels and from nuclear-derived fuels. This would really help break down those silos and move this area forward. Can the Minister also please state what plans there are for such cross-departmental work in the future?

Baroness Randerson Portrait Baroness Randerson (LD)
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My Lords, I thank the Minister for his introduction. The noble Lord has just referred to the significance of this instrument. It is a very modest little piece of secondary legislation, but it could well usher in a whole new era in relation to fuels. This is about recycled carbon fuels, which are potentially a useful extension to the RTFO order. It increases the range of fuels, as the Minister has said, which can be rewarded under the order, and will therefore increase potential total carbon savings.

At the heart of this is the fact that this is not zero carbon but lower carbon: up to 50% lower than traditional fossil fuels. Of course, we are with various techniques moving away from our traditional fossil fuels: therefore, one would say that perhaps 50% lower might be more modest as a percentage later on, as the move away from fossil fuels is generated. That is very important, because it is based on waste of fossil fuel origin, such as municipal solid waste. So, in terms of providing a new fuel, this is also solving an old problem, and is therefore very welcome.

17:00
The Explanatory Memorandum gives the example of using rejected plastics from a recycling plant. I imagine that there is a great deal of that. The EM also refers to wastes that “cannot be avoided”. There is an obvious possibility that, if you have an alternative home for your plastics, you might not bother with the more complex business of recycling your plastic to create new plastics, because recycling plastic is a very complex issue and there are all sorts of hurdles to be overcome. So what safeguards do the Government envisage to ensure that recycling plants deal rigorously with plastic, so that as much as possible is recycled and reused, rather than burned in a once and for all process, by creating, for example, sustainable aviation fuel?
That is the big win with this because, although SAF is imperfect, we cannot allow the situation on aviation to continue. We have to ensure that the perfect does not become the enemy of the good, and SAF means that we can start to deal with the 7% of UK emissions caused by aviation. The Government are committed to a SAF mandate by 2025, requiring 10% of jet fuel to be from SAF by 2030. The alternatives to SAF, hydrogen and electricity, are on a much slower trajectory, so in the short term SAF is the only way to go.
However, the UK is trailing the US and many European countries where Governments have introduced incentives to support the sustainable aviation fuel industry. In his introduction, the Minister referred to government grants and various forms of support. I would be grateful if he could provide us with more detail, so that we can judge whether the Government have gone anything like far enough to ensure that the UK becomes a world leader in sustainable aviation fuel.
I have a supplementary question to that. Do we have any plants manufacturing in this way at the moment and, if so, how many?
Finally, on a very much more detailed note, as a member of the Secondary Legislation Scrutiny Committee, which was referred to extensively in the previous item of business, I look with interest at impact assessments. I was disappointed to see, in paragraphs 12.3 and 12.4 of the Explanatory Memorandum, that there has been no impact assessment, because it is judged that there will be
“no significant … impact on the public sector”.
That seems to me a major misjudgment. This is being treated as a cost-benefit analysis item for the Treasury, but it has huge implications. By giving this permission, there is the possibility of dealing with a large part of municipal waste problems, and that, surely, is of significance to the public sector. So I think the Government have not looked broadly enough at the impact and potential of this statutory instrument.
Lord Tunnicliffe Portrait Lord Tunnicliffe (Lab)
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My Lords, I thank the Minister for his presentation of this statutory instrument. It is not an instrument that I have got on with very well. I decided to try to understand it, and that has absorbed a great deal of my time. As I tried to understand it, my old history teacher’s test came to mind: “You don’t understand it until you can explain it in your own words”. So I shall explain what I think it means, in my own words, and see whether the Minister agrees.

At one level, this is an elaborate and benign waste-management exercise. Let us look at the two comparisons here. A renewable transport fuel comes from taking CO2 out of the atmosphere and turning it into fuel using those wonderful devices called “plants”. We then turn the energy captured in those plants into fuel and burn it in vehicle engines and so forth, which releases the energy and the CO2 back into the atmosphere. The impact of the CO2 is neutral: in other words, the plants’ photosynthesis activity captures energy, essentially from the sun, and that energy is turned into fuel and then released.

A recycled carbon fuel takes carbon from beneath the earth, in the form of oil or carbon or whatever, and in this case turns it into something useful such as plastic, which then becomes waste. It is then, in this process, turned into fuel. That means, essentially, that it is burned. Energy is released and the CO2 is released into the atmosphere. The impact of CO2 is adverse, in the sense that carbon is taken from its fossil source and put into the atmosphere, which is a bad thing.

It is only if the feedstocks are not burned wastefully, through incineration or whatever, that there is a net benign effect: only if very strict controls are applied to the feedstock to make sure that it is inevitable that the feedstock is turned into free CO2, left to incineration et cetera—or it goes into landfill, which once again is an adverse outcome. Therefore, properly controlled, this policy is benign and has our support. So the Minister can stop his concerns; we are not going to try to vote this down, first because it is benign and, secondly, because we do not want a constitutional crisis.

Moving on, I have a few questions about this order. The emphasis in the literature seems to be on aviation fuel. Can the Minister give us some feel on the extent to which it will be a significant contribution to aviation fuel or where else it would be used in any significant amount? Indeed, will it be significant in any non-aviation applications? Next, is there an international dimension here in terms of the UK creating this instrument, which will stop the development of international agreements on this way of handling waste? Finally, is it within this instrument’s power for the Government to withdraw it, because it needs to meet two tests? The first is on the strict control of the feedstock while the second is about whether the financial incentives contained in the order actually work. If it is impossible to get a set of financial incentives that work, can the Government withdraw the instrument and its impact?

Lord Davies of Gower Portrait Lord Davies of Gower (Con)
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My Lords, I thank all noble Lords for their consideration of this order. I will now attempt to respond to the specific points that they made.

Let me start by saying that the RTFO includes a range of strict eligibility criteria to ensure that all fuels supplied are sustainable and provide a minimum level of greenhouse gas savings. Although RCFs are a fossil fuel, and therefore emit fossil carbon when combusted, their carbon savings are determined by comparison to the counterfactual end-of-life fate of the waste feedstock. For instance, black binbag waste uses an assumption that the waste would otherwise be incinerated in an energy-from-waste plant and calculates the benefit seen by diverting that waste into fuel production. This still needs to provide an emissions saving of 50% compared to simply using fossil diesel.

Different counterfactuals can be considered, depending on the specific waste feedstock. This ensures that the use of these fuels delivers effective greenhouse gas savings. Converting residual non-recyclable waste plastic into recycled carbon fuels can encourage a more effective use of our waste, as it can achieve greater energy recovery than disposing of the waste via conventional means.

Any recycled fuel produced from plastics will have to meet the same fuel standards as all other fuels to gain support from the RTFO. We are aware that pyrolysis oil, which is an initial stage of chemical waste recycling, can be used as a fuel for some applications and can have negative air quality issues associated with its use. However, such fuel would not be eligible under the RTFO order proposed here, as it does not meet the relevant fuel standards outlined in the order. Pyrolysis oil created during RCF production would need to be further refined into a diesel fuel that complies with existing fuel standards to receive RTFO support. We are not aware of any evidence to suggest that this would alter the air quality performance of the final fuel compared to regular diesel.

I will now address one or two of the points that were made. The noble Lord, Lord Ravensdale, made a couple of points; in particular, he talked about nuclear-derived fuels. I can tell him that we received the primary powers required to support nuclear-derived fuels under the RTFO following Royal Assent of the Energy Act 2023. We continue to consider the inclusion of nuclear-derived fuels in the RTFO. We have confirmed that the forthcoming mandate for sustainable aviation fuels will support nuclear-derived fuels; it is on track to come into force on 1 January 2025.

On the issue of cross-departmental working, DESNZ, the DfT and the Treasury are absolutely aware of the need for it and are making great efforts to work together in order to take it forward.

17:15
The noble Baroness, Lady Randerson, talked about emissions savings. They are calculated based on a counterfactual methodology which takes into account production emissions and compares them with alternative end-of-life fates. Full guidance on this has been published. The RTFO unit, which administers the scheme, conducts detailed waste assessments to ensure that the waste hierarchy is respected. Additionally, the technology development of RCFs will support the development of the advanced chemical recycling processes needed for hard-to-recycle plastics.
The mandate for sustainable aviation fuel is on track to start on 1 January 2025. It will include support for RCF-derived aviation fuel. The Government’s response to the second consultation will set out the final design of the SAF mandate and will be published in the spring of this year.
We will continue to consult on the design and implementation of a revenue certainty mechanism to support the UK SAF industry, including producers of RCF fuels, with the aim of delivering the mechanism by the end of 2026. Through the Jet Zero Council, we are working with the SAF industry to consider what other measures could be put in place before the revenue certainty mechanism is implemented.
RCFs are eligible for support only when produced from fossil wastes that cannot be avoided, reused or recycled and have the potential to reduce greenhouse gas emissions relative to traditional fossil fuels such as petrol and diesel. In line with the principles of the waste hierarchy, our recent consultation set out eligibility criteria to ensure that RCFs would not be produced from recyclable material. In practice, this means that, for RCFs produced from solid wastes to be eligible for support, suppliers must demonstrate that the feedstocks are derived from facilities that have adequate separation processes to remove recyclable dense plastics and that the resulting feedstock is categorised as refuse-derived fuel.
Lastly, on the point about the EU’s position, the UK is a leading country in the development of this policy. Although the EU’s renewable energy directive allows the support of RCFs, no EU country has yet implemented that support. This legislation will pave the way for other countries to introduce support for this emerging industry.
I hope that I have addressed most of the points raised; I will look at the record to see whether I have missed anything. I thank noble Lords for their contributions and commend this instrument to the Committee.
Motion agreed.

Financial Services and Markets Act 2000 (Disapplication or Modification of Financial Regulator Rules in Individual Cases) Regulations 2024

Tuesday 26th March 2024

(4 months ago)

Grand Committee
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Considered in Grand Committee
17:19
Moved by
Baroness Vere of Norbiton Portrait Baroness Vere of Norbiton
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That the Grand Committee do consider the Financial Services and Markets Act 2000 (Disapplication or Modification of Financial Regulator Rules in Individual Cases) Regulations 2024.

Baroness Vere of Norbiton Portrait The Parliamentary Secretary, HM Treasury (Baroness Vere of Norbiton) (Con)
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My Lords, these draft regulations make use of a provision in the Financial Services and Markets Act 2000 to enable the Prudential Regulation Authority to disapply or modify its rules for individual firms.

The ability of a regulator to flex the application of its rules for individual firms has been a long-standing feature of our approach to regulating financial services. This is a useful regulatory tool that can enable a regulator to take account of a firm’s specific circumstances in order to ensure that rules are applied in ways that achieve the best regulatory outcome. This flexibility has long been supported by regulators and the financial services industry.

Since it was introduced more than 20 years ago, the Financial Services and Markets Act 2000, known as FSMA, has included such a tool. Section 138A of FSMA enables either the Prudential Regulation Authority or the Financial Conduct Authority to disapply or modify its rules for an individual firm. Under Section 138A, the PRA or the FCA can disapply or modify a rule if a firm requests it or if the regulator has the consent of the firm.

As part of the work to adapt our regulatory regime for the UK’s new position outside the EU, this tool was reviewed. It was concluded that, while useful, Section 138A was not as effective as it could be. This is because it contains the test, which must be met before a regulator can permit a firm to disapply or modify rules, that the rules in question must be

“unduly burdensome or would not achieve the purpose for which the rules were made”.

This requirement does not always allow for rules to be flexed, even where appropriate disapplication or modification of rules would provide a better regulatory outcome.

The Government addressed this by introducing a new ability for regulators to flex their rules in a wider range of circumstances. This was legislated for through the Financial Services and Markets Act 2023 and is now set out in Section 138BA of FSMA. Under Section 138BA, the Treasury may specify regulator rules made under FSMA, which the relevant regulator can then permit a firm to disapply or modify. As with the existing rule-flexing tool in FSMA, a regulator can permit a firm to disapply or modify rules under Section 138BA only if the firm requests this or consents.

These regulations exercise, for the first time, the power approved by Parliament at Section 138BA of FSMA. The regulations do two things. First, they enable the PRA to permit a firm to disapply or modify any PRA rule in accordance with Section 138BA except for conduct rules and threshold conditions rules, which FSMA excludes from the scope of Section 138BA. After careful consideration, the Government have concluded that the PRA should have the ability to permit a firm to disapply or modify any PRA rule. This is because flexibility in the application of rules is particularly important for banks, large investment firms and insurers that are regulated by the PRA. These complex institutions, with highly specialised business models, often require a highly tailored approach to ensure that they are appropriately regulated.

Secondly, these regulations apply certain procedural safeguards to the PRA’s decisions under Section 138BA. When the PRA refuses a firm’s application or imposes conditions on a firm’s permission to disapply or modify rules, the PRA must issue a notice explaining its decision. When a permission to disapply or modify rules is given, the PRA must publish a decision notice so that it is public knowledge that a particular firm is subject to a tailored regulatory requirement. The regulations provide for an exception where the PRA is satisfied that publication is unnecessary or inappropriate, taking into account certain specified matters, for example whether publication would be detrimental to the stability of the UK financial system. If an affected firm is aggrieved by a PRA decision, it may appeal by referring the decision to the Upper Tribunal, which is the part of the Courts & Tribunals Service responsible for hearing appeals against decisions made by various public sector bodies, including the PRA and the FCA.

These regulations make use of an important regulatory tool recently approved by Parliament in FSMA 2023. They provide the PRA with a level of flexibility needed to ensure that the application of prudential rules to banks, large investment firms and insurers can be flexed, where appropriate, to ensure that regulation of these large and complex firms remains effective. They also ensure that the PRA, when taking these decisions, is appropriately accountable and transparent. I beg to move.

Lord Sharkey Portrait Lord Sharkey (LD)
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My Lords, the Explanatory Memorandum and de minimis impact assessment for this SI contain a number of vague assertions. Nowhere is there to be found a plain English statement of the benefit brought about this SI, except in the vaguest and most general terms. In essence, as the Minister has explained, this SI does one important thing: it removes the two conditions, of which one must be fulfilled, for the PRA to allow modification or disapplication of the rules for individual firms.

This power to allow the modification or disapplication is, as the Minister has said, contained in Section 138A of FSMA. The two conditions to be granted a waiver are that the rule or rules in question are “unduly burdensome” and/or

“would not achieve the purpose for which the rules were made”.

The PRA appears to be the sole judge of whether either or both of these conditions may apply. There is no definition of “unduly burdensome” and no specified mechanism for deciding whether the rules are fit for purpose or not. The Explanatory Memorandum seems to suggest that such rulings may be challenged in the Upper Tribunal. Is there a body of case law from Upper Tribunal hearings that helps with the definition of “unduly burdensome” and how “fit for purpose” may be established?

Currently, waivers may be granted only if either of the two conditions applies, and the PRA appears to have discretion over whether they do or do not. This SI changes that; it inserts an additional and unconditional waiver mechanism which allows the PRA, as the Minister has said, practically unfettered discretion to modify or disapply rules for individual firms as it sees fit. What justification is there for allowing this unfettered discretion? What is really wrong with the current arrangements?

The EM and the IA both have a go at answering those questions. In paragraph 5.4, the EM states that

“section 138A of FSMA … does not, by itself, provide sufficient flexibility for a truly agile regulatory regime … This requirement”—

by which it means the two conditions—

“does not always allow for rules to be flexed, even where appropriate disapplication or modification of rules would provide a better regulatory outcome”.

The EM does not give any examples to show how dropping the two conditions may help in practice, and nor does it explain how a better regulatory outcome may be defined or by whom—I guess that that is the PRA again, at its absolute discretion.

The impact assessment tries to give a concrete example in the matching adjustment regime, widely criticised as being not fit for purpose and, therefore, a fairly obvious candidate for disapplication or, more likely, modification under the existing rules. This shows the weakness in the impact assessment’s case, which says rather limply:

“Without this SI, the PRA would find it much more difficult to allow firms to continue to use beneficial provisions like the Matching Adjustment”.


So it is clearly not impossible—it is simply saying that it is really difficult. Why is it much more difficult? Could the Minister explain the point about a possible difficulty in dealing with the matching adjustment using Section 138A rather than this new SI? Can she give perhaps more concrete examples of the dangers avoided in or the benefits arising from dropping the two existing FSMA conditions?

17:30
Let us be clear about what this SI is saying. It is saying that the conditions of being unduly burdensome and/or not achieving intended purpose may be dropped at the absolute discretion of the PRA. That means that the PRA may decide to grant waivers in cases in which the rules are not unduly burdensome or are, in fact, fit for purpose. If this is to be the case—and I understand that it is—then some reassurances would be very welcome. Could the Minister confirm to the Committee that, whenever this new unconditional power is used, the PRA will publish, alongside the waiver, a statement saying what problem is being addressed, what benefits are expected to arise, why this use is proportionate and why the powers in Section 138A of FSMA were not used?
Lord Livermore Portrait Lord Livermore (Lab)
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My Lords, I am grateful to the Minister for introducing this SI, which delivers on one of the aims of the smarter regulatory framework, in that it will allow the Prudential Regulation Authority to disapply or modify the rules in the Financial Services and Markets Act in response to changing market conditions or emerging risks, and to facilitate innovation. We supported the principle behind this SI during the passage of the Act last year; as such, I have just a few questions.

First, can the Minister confirm how many times the existing power under Section 138A of FSMA has been used by the regulator in each of the past three years? Is there a forecast for how many times the new procedure is expected to be used in each of the next three years?

Secondly, the Explanatory Memorandum accompanying the SI notes that PRA decisions under this new mechanism will be challengeable in the Upper Tribunal, as the Minister noted. Is there any estimate of the potential caseload that may result from this new system? Can she confirm how long the Upper Tribunal is likely to take to determine challenges, and at what cost to applicants?

Thirdly, can the Minister confirm that, in considering an application to flex the rules, the regulator will remain bound by its objectives around financial and market stability? Finally, the impact assessment accompanying the SI talks of familiarisation costs for businesses. Are there any similar resourcing implications for the PRA? Are any additional positions needed at the regulator to deal with potential additional workload?

I am grateful to the Minister in advance for her answers. I take this opportunity to wish her and the noble Lord, Lord Sharkey, a happy Easter.

Baroness Vere of Norbiton Portrait Baroness Vere of Norbiton (Con)
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My Lords, I too wish all noble Lords a very happy Easter—there is one more day to go, I believe. I am grateful to both noble Lords for their contributions to this short debate. I have the answers to nearly but not quite all of their questions. I am disappointed in myself, but never mind; we will keep going.

I would like to go back to first principles. This was raised by the noble Lord, Lord Livermore, and to a certain extent by the noble Lord, Lord Sharkey. The PRA is governed by its core objectives, which are set out in law. There are two primary statutory objectives for the PRA: a general objective to promote the safety and soundness of PRA-authorised firms and an insurance objective to contribute to securing an appropriate degree of protection for those who are, or may become, insurance policyholders. Underlying that, FSMA also sets out two secondary statutory objectives for the PRA on effective competition, aligning to international standards and promoting growth in competitiveness. That is our starting point; that is the PRA’s job, per se. In taking a decision to disapply and modify rules, it must do so in that context.

The noble Lord, Lord Livermore, asked how many times Section 138A has been used in the last three years. I do not know, but I will write on that and explain what has happened to date. I will also write about the caseload and what we expect for the timeline in court. I do not anticipate that it will be enormous. With much of this regulatory behaviour, where there are disputes regulators will try to mediate wherever possible.

Turning to why the PRA would decide to disapply or modify rules, it is about getting greater flexibility to allow the system to work more effectively within the statutory objectives set out in FSMA. The provision does not direct a regulator as to how it should decide, because these are independent regulators. When this part of FSMA 2023 was debated, it attracted no debate at all, so I had therefore expected that noble Lords were very much onside with the powers we had given to the PRA, or potentially to the PRA, via this statutory instrument. It will be for the relevant regulator, in this case the PRA, to set out its policy for the disapplication or modification of rules. Noble Lords may have seen that it has already started to do this.

This goes back to the issue of transparency and ensuring that the public, and of course the industry too, are aware of what is going on. A whole series of industry consultations takes place whenever the use of 138BA is anticipated. Not only was the Section 138BA issue subject to consultations in 2020 and 2021, when we were developing and finalising our approach to the smarter regulatory framework, but, more recently, and more specifically, the PRA issued consultations on statements of policy. What happens is that the PRA says, “Okay, this is what we’re going to do. We’re going to put out a statement of policy”—for example, it has done it on Solvency II matching adjustments. The industry will then contribute to that, and it will go on to use whatever rules and regulations it now feels the industry agrees is appropriate.

So far, I think there have been two specific consultations and also a more general consultation by the PRA, basically saying, “Every time we do this, we will put out a statement of policy. Industry, do you think this is the right approach and the right thing to do?” So, I believe there is quite a lot of information being published around this. Obviously, it is not only for the industry to scrutinise that; it will be for others to scrutinise it as well, to ensure that we are not exposing our economy to detriment or, indeed, impacting our financial stability. That all seems fairly appropriate, straightforward and transparent.

The noble Lord, Lord Sharkey, asked about the Solvency II matching adjustment. It is our view, and I believe the view of the PRA, that it would not have been possible under 138A, because one of those two conditions would have had to have been met, and one could potentially say that it has not been. Is it unduly burdensome? I am not sure that it is, because it is more of an adjustment that annuity providers can use to secure more proportionate capital requirements. That is not a burdensome or non-burdensome issue; it is just that there is an opportunity to release capital by taking a sensible regulatory decision around matching.

The same goes for models as well. For example, in certain circumstances it may be the case that an institution’s model is better than the standard model that one tries to apply to the whole industry. If it can reassure the regulator that the model is robust, then, again, those might be the sorts of elements that one can put in to firm-specific changes to regulation. However, I fear that this will be returned to by the PRA over the coming years as we deal with assimilated law.

During the passage of FSMA 2023, we did say that we wanted agile regulators that are able to regulate and to change things according to risk. In this case, that will be by an individual organisation. But, as we go through and look at all the assimilated law that we dealt with under FSMA, some of it will then be able to fall away, because provision is available under 138BA that will be able to fill the regulatory gap that was previously occupied by that specific piece of regulation, but was then switched over to PRA rules and the way that it then chooses to put those into place. Again, this was the approach that was agreed during the passage of FSMA.

Sadly, I do not have anything on the PRA’s resources. I suspect that it has been gearing up for this for quite a long time; as I said, it has already started getting to work on consulting. Obviously, without the powers, it is unable to issue any firm-specific disapplications or modifications, but I will certainly write to the noble Lord if I get anything further on this matter. I have a few things to write on.

Lord Sharkey Portrait Lord Sharkey (LD)
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I thank the Minister for her explanations. I have two or three points to make.

First, I am still rather puzzled about the matching adjustment, for two reasons. As the Minister will know, there is quite a lot of criticism of the matching adjustment. There is a sense in which it would be, I would have thought, relatively easy to categorise it as not quite fit for purpose; that is why I am puzzled that Section 138A had not been, or would not be used in the case of matching adjustments. Also, the de minimis assessment says that

“the PRA would find it much more difficult”;

it does not actually say that it would be impossible using Section 138A. If the Minister is going to write to us, perhaps she might expand on this point a little.

Secondly, I am curious about the body of case law from the Upper Tribunal. It would be interesting to know whether there is such a body and whether we can learn anything from it.

My third point is to do with publication. As I understand it, the current waivers issued by the PRA and the FCA are published in some detail. I was asking for some kind of commitment. Under new Section 138BA, the waivers will be published, I assume, but will they be published saying what the problem is, why this course of action has been chosen, what benefits are expected to arise, why the powers in Section 138A of FSMA were not seen as appropriate and why new Section 138BA was necessary? When the Minister writes, perhaps she might say something about this.

Baroness Vere of Norbiton Portrait Baroness Vere of Norbiton (Con)
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I can feel officials sending me things but I will write, because the noble Lord has asked some very good questions. We will write him a nice letter with some good explanations.

Lord Sharkey Portrait Lord Sharkey (LD)
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I end by wishing the Minister a happy Easter.

Motion agreed.

Accounting Standards (Prescribed Bodies) (United States of America and Japan) (Amendment) Regulations 2024

Tuesday 26th March 2024

(4 months ago)

Grand Committee
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Considered in Grand Committee
17:43
Moved by
Lord Offord of Garvel Portrait Lord Offord of Garvel
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That the Grand Committee do consider the Accounting Standards (Prescribed Bodies) (United States of America and Japan) (Amendment) Regulations 2024.

Lord Offord of Garvel Portrait The Parliamentary Under-Secretary of State, Department for Business and Trade (Lord Offord of Garvel) (Con)
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My Lords, I beg to move that these regulations, which were laid before the House on 21 February 2024, be approved.

The Accounting Standards (Prescribed Bodies) (United States of America and Japan) Regulations 2015 provide a regulatory easement of the UK’s company reporting rules for US-listed or Japanese-listed parent companies that have chosen to re-domicile in the UK. The easement was originally introduced in 2012 and provides qualifying companies with extra time to transition from their national accounting practices to UK-recognised accounting standards. Following their UK incorporation, parent companies listed in the US or Japan may take up to four financial years to make the transition in order to prepare their group accounts in line with UK accounting principles.

At the original time of introduction in 2012, this was deemed especially helpful for companies using US and Japanese accounting standards that might otherwise have struggled to adapt to UK accounting standards when domiciling to the UK.

In 2023, the department published a post-implementation review of the 2015 regulations. The review took evidence from a small number of previously US-listed and Japanese-listed, now UK-domiciled, firms about their cost savings from the easement. The survey responses confirmed that the regulatory easement provided flexibility and enabled cost savings by the businesses using it. Businesses responding to the survey estimated that the regulations’ accounting conversion easement had reduced the scale of their conversion costs significantly. One company also said the regulations made possible the “most prudent and efficient” way for it to submit while listed in the US.

Although the post-implementation review found that the regulations were a helpful feature of the UK’s regulatory environment, it also identified a small risk of abuse of the easement. In particular, the review noted that more could be done to improve understanding that the easement was a transitional, time-limited concession, not a permanent exemption from the UK’s company reporting rules.

Having conducted the post-implementation review, the Government decided to extend the regulations, believing them to be a small, but useful, contribution to a pro-growth regulatory regime that supports inward investment. To give this decision effect, the Government laid the Accounting Standards (Prescribed Bodies) (United States of America and Japan) (Amendment) Regulations on 6 September 2023. These regulations extended the easement in recognition of its evident benefit to businesses that have used it so far. The easement would have expired without the regulations, with the result that newly domiciled US and Japanese companies would have been required to convert accounting practice immediately when they filed their first set of UK accounts.

When extending the regulations, the Government also took the opportunity to reduce the risk of the easement being misused or misunderstood by its beneficiaries. Specifically, regulation 4 of the 2023 regulations introduced an obligation on companies using the easement to include a note in their accounts stating when the easement ceases to apply. This additional requirement on companies was deemed a simple and proportionate mechanism to reduce the risk of abuse.

Regrettably, my department, the Department for Business and Trade, made a parliamentary procedural error in laying the latter provision by mistakenly using the negative resolution procedure rather than the correct affirmative resolution procedure. The new statutory instrument, which I beg to move today, is intended to correct the error. It removes regulation 4 of the 2023 amending regulations and substitutes a new regulation 5A in the 2015 regulations, doing this by the correct affirmative resolution procedure. The remainder of the 2023 amending regulations were made correctly, but the Government are grateful to the Joint Committee on Statutory Instruments for drawing their attention to the procedural error.

Driving growth in the UK economy requires attracting inward investment. These regulations are just one example of how we can make it easier for overseas companies to incorporate in the UK and create jobs in the UK economy. I beg to move.

Lord McNicol of West Kilbride Portrait Lord McNicol of West Kilbride (Lab)
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I thank the Minister for introducing this statutory instrument, which remedies the Government’s mistake from last year. It is obviously a very short one and we on this side are not going to oppose it. I welcome any opportunity to speak in favour of regulations that seek to make businesses more likely to domicile in the UK. Making sure that Britain is open for business is vital and something that we want to push the Government to do in all areas.

As the Minister said, the 2023 post-implementation review found these regulations to be a positive although not decisive factor in encouraging companies to domicile here. The review also encouraged the Government to put forward Regulation 5A, which we now have an opportunity to welcome.

The Minister talked about abuse. What amount and type of abuse does he believe the regulation will counter? I could not quite understand that. What response has there been from the relevant UK companies to the regulations, given that they have already been introduced and implemented? Are those businesses satisfied with the level of clarity?

The Minister referred to the 2012 regulations but the draft instrument and the Explanatory Memorandum talk about the 2015 regulations, so I was not quite clear what he was referring to. Some clarity on that would be much appreciated.

Lord Offord of Garvel Portrait Lord Offord of Garvel (Con)
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I thank the noble Lord for his comments on this statutory instrument, and I welcome his enthusiasm for a pro-growth regulatory environment in the UK, which we have in common on both sides of the House. These regulations provide an easement of the UK’s company reporting rules, specifically to US and Japanese-listed parent companies.

I emphasise that this is a minority sport; not many companies participate in it, but where they do, among the major economies, there is perhaps more divergence in accounting standards in the US and Japan, because they are the biggest in the G7. That is why we have accommodated them with this legislation. I point out that this is a transitional concession simply to give companies more time and scope to convert their accounts to UK-recognised accounting principles. It is also designed to help safeguard the integrity of the UK’s accounting systems and reduce the risk of abuse.

On the concept of abuse, the post-implementation review found one instance in which a company was at risk of using regulations beyond the allotted four-year period. This is a minor risk, with only one instance, but the Government thought it prudent to address the concern while we have this opportunity.

The companies using this easement found it to be a small but useful intervention, citing cost savings of tens of thousands of pounds in some instances. For several larger companies, it amounted to millions of pounds.

The Government now propose to correct the procedural error made in laying Regulation 4 of the 2023 regulations by means of this affirmative statutory instrument. I therefore commend it to the Committee.

Motion agreed.
Baroness McIntosh of Hudnall Portrait The Deputy Chairman of Committees (Baroness McIntosh of Hudnall) (Lab)
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That completes the business before Grand Committee this afternoon. I wish a happy Easter to one and all.

Committee adjourned at 5.53 pm.

House of Lords

Tuesday 26th March 2024

(4 months ago)

Lords Chamber
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Tuesday 26 March 2024
14:30
Prayers—read by the Lord Bishop of Oxford.

Credit Card Invoices

Tuesday 26th March 2024

(4 months ago)

Lords Chamber
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Question
14:37
Asked by
Lord Hodgson of Astley Abbotts Portrait Lord Hodgson of Astley Abbotts
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To ask His Majesty’s Government what plans they have, if any, to require credit card issuers to provide a full description of goods or services provided on their customer invoices.

Baroness Vere of Norbiton Portrait The Parliamentary Secretary, HM Treasury (Baroness Vere of Norbiton) (Con)
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My Lords, while issuers are not obliged to provide full a description of goods or services, there is existing legislation governing customer transactions. This requires customers to be given a statement of their transactions at least monthly. Under the rules, providers must include a reference to help the customer to identify the transaction, and, where appropriate, information relating to the payee.

Lord Hodgson of Astley Abbotts Portrait Lord Hodgson of Astley Abbotts (Con)
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My Lords, I am very grateful to my noble friend for that Answer, and also for allowing me to brief her on what I felt was the problem, but I am afraid her Answer does not satisfy me at all. How many Members of your Lordships’ House when they receive their credit card slip find transactions which they simply cannot recognise at all, for £5, £10 or maybe £15? How many times do noble Lords go on the fraud line and find, after quarter of an hour sitting there, that they have to put the phone down because they can go no further? Would the Government not agree this must be an incitement of low-level but quite extensive fraud, which is likely to get worse as we do more tap-and-go transactions and less in cash? Would it not be a good idea if it was a requirement to put on the credit card entry the name of the customer, the postcode that they operate from and a two or three-word description of the product or service provided?

Baroness Vere of Norbiton Portrait Baroness Vere of Norbiton (Con)
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My Lords, payments are governed by the Payment Services Regulations. The Government published a call for evidence in January 2023 to test whether the regulations are meeting their aims. The Government did not receive any evidence that would imply that more specificity would be helpful, either for customers or in terms of tackling fraud. However, I say to my noble friend—and I appreciate him raising this issue—that, as part of the smarter regulatory framework, firm-facing requirements will be repealed and replaced by rules from the FCA. Of course, this may be something that we can take forward in the future.

Lord Livermore Portrait Lord Livermore (Lab)
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My Lords, we discussed last week concerns that the new generation of touch-screen card readers lack essential accessibility features needed by blind and partially sighted people. Looking into this further, it seems that these readers can also come with other issues, whereby if they are not correctly configured, the only description of transactions that appears on statements is the name of the machine manufacturer rather than the retailer you shopped with. Can the Minister see a case for steps to ensure payment devices are correctly configured, so that transactions can be more easily traced?

Baroness Vere of Norbiton Portrait Baroness Vere of Norbiton (Con)
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I agree with the noble Lord that those payment machines should be correctly configured. When customers realise that there is a problem, they must raise it with the bank, which will then be able to take further action. It is the case that if there is any suspicion of fraud—whether using a credit card or a debit card—the customer can get their funds back.

Lord Fox Portrait Lord Fox (LD)
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My Lords, we are rightly discussing regulations for credit cards and consumer credit, but an increasing amount of consumer credit is coming from the buy now, pay later app sector, which is unregulated. Does the Minister understand how lopsided that is? It is time that the Government looked into regulating buy now, pay later, so that people have equal safety on both sides of the consumer credit barrier.

Baroness Vere of Norbiton Portrait Baroness Vere of Norbiton (Con)
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The Government are considering responses to a recent consultation on draft legislation for buy now, pay later. The Government believe that any regulation of this area must be proportionate, because buy now, pay later can be very useful to a large number of people. There are existing protections in the Consumer Rights Act, and the FCA has powers over the terms and conditions of the buy now, pay later contracts.

Lord Holmes of Richmond Portrait Lord Holmes of Richmond (Con)
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My Lords, I declare my financial services interests as set out in the register. Does my noble friend agree that, whether paying with a credit card or a debit card, one should be able to do so in an accessible manner? That will happen only if all financial services products and card payment machines are designed with inclusion in mind right from the outset.

Baroness Vere of Norbiton Portrait Baroness Vere of Norbiton (Con)
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I am grateful to my noble friend for raising this issue again. As I mentioned last time, there is now a consumer duty, which is a very important underpinning for financial services providers, which have a duty of care for their customers. That came into effect on 31 July 2023, and the Government and the FCA will monitor the effectiveness of the consumer duty as it beds in.

Lord Dobbs Portrait Lord Dobbs (Con)
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Does my noble friend agree that the Government have a lot more to do, in the spirt of full disclosure, in explaining the cost of Covid and the lockdown? The latest estimate is that it has already cost over £400 billion. With all the excess deaths and, in particular, mental health issues we are now experiencing, that cost will grow. Would it not be sensible to explain far more fully to everybody in this country the costs to them? That means that there would be no more magic money tree and that the Treasury’s pre-Budget leaks would be much more realistic. Furthermore, we would be much better placed to decide, if there were to be another epidemic, what we should be doing.

Baroness Vere of Norbiton Portrait Baroness Vere of Norbiton (Con)
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My noble friend is quite right. He may have heard some of the explanation I gave in the debate on the Spring Budget on why we had to take the decisions that we did. Noble Lords will all recall that the Government stepped in to provide furlough for nearly 11 million people to save their jobs and protected nearly 500,000 businesses. It was essential that we did that at the time, but it came at a cost to our economy and society, which must be repaid at some stage.

Lord Blunkett Portrait Lord Blunkett (Lab)
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My Lords, last week I invited the noble Baroness to dinner, if we could find a restaurant with an accessible payment device. That evening, I went to a restaurant that had purchased a cover that made the device accessible. I have been in correspondence with the Minister since and am very grateful for her interest. Could we not simply make all providers offer that service, rather than restaurants having to buy it in?

Baroness Vere of Norbiton Portrait Baroness Vere of Norbiton (Con)
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I am interested to know if that is the restaurant that the noble Lord intends to take me to. I have been in correspondence with him since last week. We will work very closely with UK Finance as its finishes off its accessibility forums to understand what more can be done to ensure that payment devices are accessible.

Food Security

Tuesday 26th March 2024

(4 months ago)

Lords Chamber
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Question
14:45
Asked by
Baroness McIntosh of Pickering Portrait Baroness McIntosh of Pickering
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To ask His Majesty’s Government what steps they will take to improve food security.

Baroness McIntosh of Pickering Portrait Baroness McIntosh of Pickering (Con)
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My Lords, I beg leave to ask the Question standing in my name on the Order Paper and refer to my entry in the register of interests.

Lord Douglas-Miller Portrait The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Douglas-Miller) (Con)
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My Lords, I declare my interests as set out in the register. UK food security remains consistently high, and the Government continue to strengthen it by supporting our farmers and food producers. Underlining this commitment, at the NFU conference we announced the introduction of an annual food security index, underpinning the three-yearly UK food security report. The next report will be out before the end of the year, with the first draft of the index set for the second UK Farm to Fork summit this spring.

Baroness McIntosh of Pickering Portrait Baroness McIntosh of Pickering (Con)
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My Lords, will my noble friend join with me in paying tribute to and celebrating the work of our farmers in putting food on our plates, in particular the livestock producers on the hills, and tenant farmers especially? Will my noble friend take this opportunity, against the backdrop of increasing challenges to self-sufficiency, to give farmers and consumers alike an undertaking that any imported food and agricultural products will meet the same high animal welfare and environmental standards as those produced in this country?

Lord Douglas-Miller Portrait Lord Douglas-Miller (Con)
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I thank my noble friend and entirely agree with her on the issue of supporting our farmers and congratulating them on the work they do. I quite accept the premise that a significant change is going on in the agricultural sector. It was clearly signalled when we transitioned away from the common agricultural policy and focused farming on delivering both food production and environmental goals through ELMS. It is entirely understandable that farmers have concerns about this transition, as it requires them to reappraise how they use the entirety of their land. We are guiding and supporting farmers with new technology, new science and improved productivity to not only produce and maintain high quality food but to enrich our soil, reduce pollution and help reverse biodiversity loss.

Baroness Bakewell of Hardington Mandeville Portrait Baroness Bakewell of Hardington Mandeville (LD)
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My noble Lords, the food security report identifies climate change and biodiversity loss as the greatest threat to UK food security. Therefore, will the Government’s upcoming Farm to Fork summit include representatives from environmental organisations working on climate change and biodiversity?

Lord Douglas-Miller Portrait Lord Douglas-Miller (Con)
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I thank the noble Baroness for her question. As she will know, the upcoming Farm to Fork summit is the second one we have held, and the National Farmers’ Union requested that we implement this as an annual event. I forget the exact statistics but at the last one, over 70 representatives from the wider industry, across the entire supply chain, were in attendance, along with food producers from across the whole UK. The intention is to grow that at our next summit, which is in the spring.

Lord Foulkes of Cumnock Portrait Lord Foulkes of Cumnock (Lab Co-op)
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My Lords, with respect, the Minister and the noble Baroness, Lady McIntosh, are living in a parallel universe. Did the Minister not see 120 farmers driving their tractors up Whitehall, honking and protesting? Were we not told that when we left the European Union everything would be okay for farmers? What has gone wrong?

Lord Douglas-Miller Portrait Lord Douglas-Miller (Con)
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The noble Lord raises a good point, and I was a little surprised that I did not see him out there when I went to visit the protesters last night. He is entirely correct; they did make a lot of noise. The Government are supporting farmers across a whole range of areas, be it technology, science, financial, or productivity gain. But it needs to be understood that we are going through a transition at the moment, in order to recalibrate and rebalance our food production and environmental benefits in the countryside. The Government are being crystal clear that food production comes first and foremost in that battle.

Lord Trees Portrait Lord Trees (CB)
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My Lords, further to the Question asked by the noble Baroness, Lady McIntosh, may I press the Minister a bit further? In negotiating free trade agreements, will His Majesty’s Government set minimum environmental and animal welfare standards which imported animal products must meet, equivalent to those we demand of our own farmers, so that we do not put our farmers at a comparative disadvantage and undermine our food security?

Lord Douglas-Miller Portrait Lord Douglas-Miller (Con)
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The noble Lord is absolutely right about this issue. Both Defra and the Government have been crystal clear that agriculture is at the forefront of any trade deals we negotiate. We reserve the right to pause negotiations with any country if progress is not being made. We recently did this with Canada, which the president of the NFU welcomed as a relief for farmers. All imports need to meet our food safety requirements, and free trade agreements do not change our protections for food safety, animal welfare and the environment.

Lord Bellingham Portrait Lord Bellingham (Con)
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My Lords, does the Minister agree that if we are serious about food security, we should do all we can to stop large solar arrays being put on high-quality agricultural land? Does he also agree that the way forward is to ensure that solar panels are put on warehouses across the country and located alongside motorways and railways?

Lord Douglas-Miller Portrait Lord Douglas-Miller (Con)
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My noble friend is correct. There is a presumption against planning on grade 1, grade 2 and grade 3 land. He is entirely right that solar energy and any other developments need to be appropriately sited to achieve the right result.

Baroness Hayman of Ullock Portrait Baroness Hayman of Ullock (Lab)
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My Lords, the NFU has asked the Government to identify opportunities to increase our market share of foods we can produce sustainably, including a commitment to source 50% of food into the public sector from British farms. Public procurement can support our food producers, so what are the Government doing to support farmers through procurement?

Lord Douglas-Miller Portrait Lord Douglas-Miller (Con)
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I thank the noble Baroness for her question. This month the Environment Secretary appointed Will Quince MP as an independent adviser to support our ongoing work to improve food procurement in the public sector. His review will look at how we can increase the impact and reach of the existing government buying standards for food and catering services and promote our high standards in places such as residential care, hospitals and schools.

None Portrait Noble Lords
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The Bishop.

Lord Bishop of St Edmundsbury and Ipswich Portrait The Lord Bishop of St Edmundsbury and Ipswich
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My Lords, I indicate my interests as listed in the register and pay tribute to farmers. As the Minister has said, the priorities are food production and environmental quality, including rebuilding biodiversity, restoring clean air and water and prioritising the rebuilding of healthy soils. What ongoing assessment is being made of the current ELMS and SFI programmes to meet these aims?

Lord Douglas-Miller Portrait Lord Douglas-Miller (Con)
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I thank the right reverend Prelate for his question. Defra has a large outreach programme with its constituent members, particularly its farming community. We monitor a lot of this work most of the time. Through ELMS we can assess the impact we are having on improving the environment.

Lord Winston Portrait Lord Winston (Lab)
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My Lords, what assessment have the Government made, since the introduction of the precision breeding Bill, of the risk to the environment of releasing into it genetically modified plants?

Lord Douglas-Miller Portrait Lord Douglas-Miller (Con)
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The noble Lord raises a serious question on a serious subject. The Government are in the process of assessing this impact, and I hope to write to him shortly with the answer to his question.

Baroness Jones of Moulsecoomb Portrait Baroness Jones of Moulsecoomb (GP)
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My Lords—for the third time—can the Minister answer the question from the noble Baroness, Lady Bakewell: at the Farm to Fork event, will there be people from the environmental lobby who are well-informed about how to preserve nature?

Lord Douglas-Miller Portrait Lord Douglas-Miller (Con)
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Perhaps we could invite the noble Baroness to attend; that might solve the problem completely.

Baroness Walmsley Portrait Baroness Walmsley (LD)
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My Lords, I would be most grateful if the Minister wrote to my noble friend Lady Bakewell and answered her question. My question is about food waste. There is far too much of it, and there is strong support in the food industry for making reporting on food waste mandatory. Yet, in response to a recommendation of the House of Commons Environmental Audit Committee, the Government have decided, against all the evidence, to delay doing anything for another four to six months. Why is that, and are the Government content to leave it to the next Government?

Lord Douglas-Miller Portrait Lord Douglas-Miller (Con)
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No, I am not content to leave it to the next Government. I cannot furnish the noble Baroness with a date, but I will write to her and, indeed, to the noble Baroness, Lady Bakewell, shortly.

Ukraine: Arms and Ammunition Costs

Tuesday 26th March 2024

(4 months ago)

Lords Chamber
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Question
14:55
Asked by
Lord Trefgarne Portrait Lord Trefgarne
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To ask His Majesty’s Government what has been the cost to public funds of the arms and ammunition supplied to Ukraine so far.

Lord Harlech Portrait Lord Harlech (Con)
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My Lords, I declare my interest as a serving Army reservist. The £7.1 billion that we have committed since February 2022 covers a broad range of military support to Ukraine. This includes rapid procurement and gifting of equipment, development of international capability coalitions and training support through Operation Interflex. We have not provided a breakdown of this military support to Ukraine to ensure that we do not jeopardise a live operation by putting into the public domain information that could be used to assist our adversaries.

Lord Trefgarne Portrait Lord Trefgarne (Con)
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My Lords, I am grateful to my noble friend for that answer, which I understand. However, is he clear that the extent of the training being carried out for Ukrainian personnel is, to some extent, causing some problems, not least with the Hawk aircraft? I gather that nine of these aircraft went unserviceable.

Lord Harlech Portrait Lord Harlech (Con)
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My Lords, Operation Interflex and all training for Ukrainian armed service personnel are key components of our support for their fight. The UK continues to deliver a major training operation for Ukrainian forces, with over 36,000 Ukrainian personnel trained in the UK since June 2022 and more than 60,000 Ukrainians trained since Russia launched its invasion of Ukraine in 2014.

Lord McFall of Alcluith Portrait The Lord Speaker (Lord McFall of Alcluith)
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My Lords, the noble Lord, Lord Campbell-Savours, is participating remotely.

Lord Campbell-Savours Portrait Lord Campbell-Savours (Lab) [V]
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My Lords, as we approach US elections, Trump, a possible victor— who knows?—is threatening cuts, especially on arms expenditure for Ukraine. Are the Government and Parliament thinking through the consequences of today’s trajectory, which, without an open and honest debate here in Europe, may draw us into a wider conflict, with Putin now openly referring to war? Such a war could destabilise Europe, challenge public expenditure priorities and potentially unleash forces of European instability. Why is there no polling on the war? There is polling in America.

Lord Harlech Portrait Lord Harlech (Con)
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There was a broad range of topics in the noble Lord’s questions. First, it is not for us to comment on US domestic affairs. The United States is our closest ally, and we will work closely with whomever wins this year’s election, just as we have with current and previous Administrations. On NATO, the United Kingdom urges all allies to meet their NATO commitments and increase their contributions to the alliance.

Baroness Uddin Portrait Baroness Uddin (Non-Afl)
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My Lords, first, I thank the Minister for his service. Are the arms and ammunition supplied to Ukraine predicated on legal advice received by the Government? If so, has such advice been received before supplying arms to Israel and the IDF, in the light of the ICJ ruling?

Lord Harlech Portrait Lord Harlech (Con)
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In relation to the Israel/Gaza conflict, we continue to call for international humanitarian law to be respected and for civilians to be protected. Israel has said that it plans to act within international humanitarian law, and has the ability to do so. At the same time, we are deeply concerned about the impact on the civilian population.

Lord Wallace of Saltaire Portrait Lord Wallace of Saltaire (LD)
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My Lords, can the Minister tell us how closely we are co-ordinating our efforts in the provision of arms and assistance to Ukraine? What steps are the Government taking to expand domestic production, as the consumption of arms, in particular shells, in the Ukraine conflict is clearly very high?

Lord Harlech Portrait Lord Harlech (Con)
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My Lords, as part of the most recent financial contribution, there is a dedicated artillery package. On 24 February 2024, it was announced that the UK would spend £245 million throughout the next year to procure and invigorate supply chains to produce such urgently needed artillery ammunition for Ukraine.

Lord Lancaster of Kimbolton Portrait Lord Lancaster of Kimbolton (Con)
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My Lords, I remind your Lordships’ House of my interest as a serving member of the Armed Forces. The UK Government should be commended for their gifting in kind to Ukraine through the KINDRED programme. However, it has exposed the fragility of the land industrial base. Further to the previous question, is it now not key to look carefully at perhaps moving away from doing orders bit by bit, towards ensuring a continuous flow, perhaps working with our NATO allies? Rather like a maritime industrial base, this would ensure that our industrial base can be expanded when required.

Lord Harlech Portrait Lord Harlech (Con)
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My noble friend makes a very important point. The Ministry of Defence remains fully engaged with industry, allies and partners to ensure both the continuation of supplies to Ukraine and the replacement of all equipment and munitions granted in kind from UK stocks as rapidly as possible. I am pleased to tell the House that a number of substantial contracts have been placed directly to replenish UK stockpiles. These include securing contracts for next generation light anti-tank weapons, Starstreak high-velocity missiles, lightweight multirole missiles, Javelin and Brimstone missiles, 155 millimetre artillery rounds and 5.56 millimetre rifle rounds.

Lord Coaker Portrait Lord Coaker (Lab)
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My Lords, the key figure that the noble Lord gave this Chamber was the £7.1 billion that this country has already provided to Ukraine. I hope that, in due course, we will provide more if more is needed. Is this not the price of defending democracy and freedom? We should stand with Ukraine and support it in every way we can. This is the official position of His Majesty’s Opposition. I hope the noble Lord can agree with it.

Lord Harlech Portrait Lord Harlech (Con)
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I pay tribute to the noble Lord and to His Majesty’s loyal Opposition for their continued support, from the first day of this conflict. We hope that the conflict will come to an end as soon as possible, but we will do whatever it takes to support Ukraine in her fight.

Lord Stirrup Portrait Lord Stirrup (CB)
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My Lords, could the Minister go a bit further in response to the point from the noble Lord, Lord Wallace? The contribution that the UK has made to Ukraine is welcome and to be applauded, but by itself it is wholly insufficient. President Macron has said that Europe must do whatever is necessary to ensure Ukraine’s success, irrespective of political decisions in the United States. However, as yet, there has been no sign of any substance following up that assertion. What detailed discussions are the UK Government having with the EU to give that statement reality, because the urgency is real and now.

Lord Harlech Portrait Lord Harlech (Con)
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I agree with the noble and gallant Lord that the urgency is real and now. The UK and France stand side by side with Ukraine, including through co-ordinating training Ukrainian fighter pilots and marines, and advocating for the Ukrainian cause at NATO, the G7 and the UN Security Council. The UK was the first country to sign a security guarantee with Ukraine. France has now also signed security guarantees, and of course we want others to do the same.

Lord Grocott Portrait Lord Grocott (Lab)
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Does the Minister acknowledge that, as the war has developed, it has many more characteristics similar to what I might describe as a 20th-century war, rather than the 21st-century war we thought it might be? It has a lot of traditional methods—if that is the right way to describe it—of fighting, with trenches and all the rest of it. Given that, were the Government prepared for the resulting demand for munitions on a scale which, as far as I can see, was never anticipated?

Lord Harlech Portrait Lord Harlech (Con)
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My Lords, this goes back to my point about how defence is engaging with industry to replenish stockpiles as soon as possible. The noble Lord is absolutely right in one respect: this is a form of brutal, attritional trench warfare—we call it FIWAF, meaning fighting in woods and forest. However, it has the very new and dangerous 21st-century complexity of unmanned aerial craft, otherwise known as drones. So this is a new and incredibly dangerous battlespace.

Lord Lexden Portrait Lord Lexden (Con)
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My Lords, following the question from the noble and gallant Lord, Lord Stirrup, should not the Government be actively seeking assistance and increased activity from our European NATO allies? Should we not have a clear plan to put pressure on them?

Lord Harlech Portrait Lord Harlech (Con)
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I take my noble friend’s point, as I do the noble and gallant Lord’s. I assure the House that dialogue is ongoing, all the time.

Child Poverty

Tuesday 26th March 2024

(4 months ago)

Lords Chamber
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Question
15:05
Asked by
Baroness Lister of Burtersett Portrait Baroness Lister of Burtersett
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To ask His Majesty’s Government what action they are taking in response to the fact that 4.3 million children lived in relative poverty in 2023, according to data published by the Department for Work and Pensions on 21 March.

Viscount Younger of Leckie Portrait The Parliamentary Under-Secretary of State, Department for Work and Pensions (Viscount Younger of Leckie) (Con)
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My Lords, these statistics cover 2022-23—a year when war in Ukraine and global supply chain challenges led to unexpected and high inflation rates, averaging 10% over the year. These factors are reflected in the statistics. The Government have since taken firm action to support those on the lowest incomes, including through uprating benefits by 10.1% from April 2023, increasing the national living wage from April 2023 and providing cost of living support worth £96 billion over 2022-23 and 2023-24.

Baroness Lister of Burtersett Portrait Baroness Lister of Burtersett (Lab)
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My Lords, we have a record number of children in poverty, of whom two-thirds are considered to be in deep poverty, and an annual increase even on the Government’s preferred measure. Plus more food insecurity means more hungry children and reliance on food banks. So what was the Secretary of State’s response? “The plan is working”—working for whom? When seven in 10 children in poverty have at least one employed parent, parental employment can be only a partial answer. Welcome as it is, benefits uprating is really the minimum we should be expecting. Will the Government therefore now accept that it is high time for a new plan, which scraps the social security policies that drive worsening child poverty and sets out a comprehensive, cross-government child poverty strategy?

Viscount Younger of Leckie Portrait Viscount Younger of Leckie (Con)
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Setting such a strategy and targets can drive action that focuses primarily on moving the incomes for those just in poverty—just above a somewhat arbitrary poverty line—while doing nothing to help those on the very lowest incomes or to improve children’s future prospects. Therefore, we have no plans to reintroduce an approach to tackling child poverty focused primarily on income-based targets. Having said that, perhaps I can reassure the noble Baroness that my Department for Work and Pensions consistently works across government to support the most vulnerable households.

Lord Laming Portrait Lord Laming (CB)
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My Lords, does the Minister agree that this figure from the department graphically indicates the importance of the school meal service? Would it be better to go back to a position in which the head teacher, rather than some large external body that is unknown to the school, is responsible for the quality and delivery of the service?

Viscount Younger of Leckie Portrait Viscount Younger of Leckie (Con)
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I note that the noble Lord has raised this point in the House in the past, and the Government certainly support the provision of nutritious food in schools. It ensures that pupils develop healthy eating habits and can contribute to concentrating and learning in the classroom. As he will know, we have extended free school meal eligibility several times and to more groups of children than any other Government over the past half a century. We provide free meals for 2 million disadvantaged pupils through the benefits-related criteria.

Baroness Hughes of Stretford Portrait Baroness Hughes of Stretford (Lab)
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My Lords, the Minister was quite selective in the figures he gave in his Answer because, in fact, by every official measure, child poverty has been rising faster in the UK than in most OECD and EU countries, many of which have actually reduced child poverty during this period. It is the fastest rise we have seen for almost 30 years, and this is not an accident; it is the direct consequence of the Government’s political decisions, taking money away from the poorest families to benefit the better off. Does the Minister not agree that it is now imperative that the Government bring forward the sort of comprehensive plan to which my noble friend referred, to start to restore the incomes of these families and children and take them out of poverty?

Viscount Younger of Leckie Portrait Viscount Younger of Leckie (Con)
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I beg to differ with the noble Baroness, because analysis shows that the Government’s cost of living support prevented 1.3 million people falling into absolute poverty after housing costs in 2022-23. That includes 300,000 children, 600,000 working-age adults and 400,000 pensioners. The £96 billion I alluded to earlier included £20 billion for two rounds of cost of living payments for more than 8 million households on eligible means-tested benefits. I gently say to the noble Baroness that she should bear these very important initiatives in mind.

Baroness Boycott Portrait Baroness Boycott (CB)
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My Lords, I draw the House’s attention to the 200,000 children who represent 14% of the children who are eligible for free school meals, even on the very small amount of money their parents are allowed to use, who are not registered. They are not registered because there is no automatic registration, which can happen extremely easily once people are handed out universal credit. I have asked the Government this many times: why does automatic registration not happen? This is 200,000 kids today, right now, who did not get a meal that we pay for.

Viscount Younger of Leckie Portrait Viscount Younger of Leckie (Con)
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I have certainly taken note of the point raised by the noble Baroness, but I say again that we have extended eligibility several times and to more groups of children than any other Government over the past half a century. Free meal support is also available to around 90,000 disadvantaged students in further education, so an awful lot has been happening in that space.

Baroness Burt of Solihull Portrait Baroness Burt of Solihull (LD)
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My Lords, the fact that nearly one in three children in the UK are living in relative poverty is the logical outcome of years of starving social services and funding for the most vulnerable in our country. At worst, that translates into empty tummies, cold homes and even no bed to yourself. I am sure the House would be interested to hear the Minister’s excuse—surely not Ukraine again. In an election year, I have to tell him that the British people will neither forget nor forgive what this Government have done to our children.

Viscount Younger of Leckie Portrait Viscount Younger of Leckie (Con)
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I think that is a little unfair from the noble Baroness. She will recognise, as I think the House does, that Ukraine has played a part. In the previous Question we heard about our role as a country, which is continuing, and we have had support from the Opposition on that. We have set a clear and sustainable approach, based on evidence of the important role that parental employment plays in reducing the risk of child poverty. We have a huge number of initiatives in my department to encourage more people to get into work. That is why, with more than 900,000 vacancies across the UK, our focus is firmly on supporting parents into and to progress in work, which helps directly with poverty.

Baroness Sherlock Portrait Baroness Sherlock (Lab)
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My Lords, the Minister challenged my noble friend and cited statistics on absolute poverty, which, as we know, is the Government’s favourite measure. The last time we discussed this, on 28 February, the Minister told me that the Government prefer absolute poverty rather than relative poverty as a measure. He said:

“The absolute poverty line is fixed in real terms, so it will only ever worsen if people are getting poorer and will only ever improve if people are getting richer”.—[Official Report, 28/2/24; col. 1028.]


Since the latest official statistics show that 600,000 more people, half of them kids, are living in absolute poverty, does the Minister accept that the Government’s policies are now pushing children into poverty? If so, what are they going to do about it?

Viscount Younger of Leckie Portrait Viscount Younger of Leckie (Con)
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I have already spelled out what we are doing about it. Do not forget that these figures are one year out; they are retrospective figures. In my opening Answer, I spelled out what we had taken action on. The noble Baroness is right; we do prefer absolute poverty, because relative poverty can also provide counterintuitive results, as it is likely to fall during recessions due to falling median incomes. Under this measure, poverty can decrease even if people are getting poorer.

Baroness Meacher Portrait Baroness Meacher (CB)
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My Lords, I wonder whether the percentage of children in absolute poverty in this country is higher or lower than in France or Germany. I wonder whether this Government have some lessons to learn from our neighbours.

Viscount Younger of Leckie Portrait Viscount Younger of Leckie (Con)
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Indeed. I do not have any figures to answer the noble Baroness’s question, but she makes an important point, which other Peers have raised, about the importance of bringing as many children out of poverty as possible. I happen to cover the Child Maintenance Service in government, and I feel very proud that every year we take 160,000 children out of poverty by ensuring that the money flows from the paying parent to the receiving parent—it is very important.

Baroness O'Grady of Upper Holloway Portrait Baroness O'Grady of Upper Holloway (Lab)
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My Lords, is the Minister aware of TUC-commissioned research from November 2022 that showed that more than a quarter of children whose parents had paid jobs in social care are growing up in poverty? That is a scandal—220,000 children of parents who do work that I am sure noble Lords will agree is vital, skilled and valuable work for this country. Can the Minister tell me whether the picture in respect of the children of workers in social care has got better or worse since 2022? If it is worse, what are the Government going to do about it?

Viscount Younger of Leckie Portrait Viscount Younger of Leckie (Con)
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I have already mentioned many of the things that we are doing. I have also been quite open by saying that the war in Ukraine and the pandemic have had an effect. Those are not the only factors, but it is important to recognise that. To support people in work, the voluntary in-work progression offer is now available in all jobcentres across Great Britain, providing an estimated 1.6 million low-paid workers on universal credit access to personalised work coach support to help them increase their earnings. The department is working at pace with a number of important initiatives to encourage more people into work, which takes more children out of poverty.

HMRC Self-assessment Helpline

Tuesday 26th March 2024

(4 months ago)

Lords Chamber
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Commons Urgent Question
The following Answer to an Urgent Question was given in the House of Commons on Wednesday 20 March.
“I thank the honourable Member for Ealing North, James Murray, and others, for raising the important issue of HMRC’s customer services and its plans to provide better services for taxpayers.
As Members probably know, His Majesty’s Revenue and Customs has announced that it is halting planned changes to its helplines, but aims to encourage more taxpayers to self-serve online. It has listened to the feedback and recognises that more needs to be done to ensure that all taxpayer needs are met, while encouraging those who can to make the transition to online services. Making the best use of online services allows HMRC to help more taxpayers, and to get the most out of every pound of taxpayers’ money by boosting productivity. HMRC helpline and web-chat advisers will always be there for taxpayers who need support because they are vulnerable or digitally excluded, or have complex affairs. I recognise that such reassurances were not communicated clearly enough yesterday.
Of course, the pace of this change needs to match the public’s appetite for managing their tax affairs online. The changes in the self-assessment VAT and PAYE helplines announced by HMRC will therefore be halted while it engages with stakeholders, which means that the phone lines will remain open as usual. HMRC will now work with stakeholders—including me—while continuing to encourage customers to self-serve and gain access to the information that they need more quickly and easily by going online or to the HMRC app, which is available 24/7”.
15:17
Lord Livermore Portrait Lord Livermore (Lab)
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My Lords, on Tuesday 19 March, HMRC announced that it would close its self-assessment helpline for half the year. The very next day, following a U-turn by the Chancellor, HMRC announced that this closure would not go ahead. When was any Treasury Minister first informed by HMRC of its decision to close the helpline? Reports of the Chancellor’s U-turn referred to a “pause”—what criteria will be used to decide whether, and when, HMRC will proceed with its planned closure of the helpline?

Baroness Vere of Norbiton Portrait The Parliamentary Secretary, HM Treasury (Baroness Vere of Norbiton) (Con)
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My Lords, I do not have the details of who was told at what stage, but even though HMRC is a non-ministerial department and has a close relationship with the Ministers with oversight of HMRC, operational decisions are taken by HMRC’s management. The decision on the helpline followed two trials last year, the evaluations for which were published, showing that closing access to those helplines for certain people had no adverse effects at all. A commitment has been made that the helplines will remain open over the year ahead, but we are focused on listening to feedback and ensuring that as many people as possible can make the transition to online services, which have a far higher customer satisfaction rate than the phone lines.

Baroness Kramer Portrait Baroness Kramer (LD)
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My Lords, it is not just this particular shambles: HMRC’s own surveys, which you can read in its annual reports, show that customer service has pretty much collapsed within that departmental agency. Its leadership has failed to recognise that the huge shift to self-employment, contract work and gig work has pushed swathes of ordinary people into a tax minefield. I ask that the Government provide HMRC with more resources to deal with this issue, but will they also tackle the culture at HMRC, which, at the top, remains focused on compliance through aggressive enforcement rather than through proper customer service and support? Most people want to pay the right tax; they just do not know what it is or how to do it.

Baroness Vere of Norbiton Portrait Baroness Vere of Norbiton (Con)
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I do not fully recognise the picture that the noble Baroness paints. Over the course of this Parliament, the amount of funding provided to HMRC has increased from £4.3 billion in 2019-20 to £5.2 billion in 2024-25, and the overall customer satisfaction across phone, web chat and online is 79.2% versus a target of 80%. However, I recognise that there are certain elements within the HMRC offer where taxpayers need to get a better service. That includes answering correspondence for some of the more complex and hard-to-reach people: the vulnerable and the digitally excluded. That is exactly why, quite frankly, we need to move resources from taxpayers who can and should use online and ensure that those resources can be targeted at those areas where customer service is not as good as it should be. That is what we intend to do.

Lord Forsyth of Drumlean Portrait Lord Forsyth of Drumlean (Con)
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My Lords, does my noble friend accept that the large reduction in the number of people in this country who are self-employed is a direct consequence of the Government’s introduction of IR35 legislation, which has led to huge confusion among the self-employed? Many people are giving up—just ask any taxi driver in London. Does she really think that the Inland Revenue, or HMRC as it is now, can provide a proper service with so many of its people working from home?

Baroness Vere of Norbiton Portrait Baroness Vere of Norbiton (Con)
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Obviously, it is up to the individual to ensure that they pay the right tax at the right time. HMRC intends to make that as easy as possible, but for some more complex situations it is right that individuals get tax advice. People working for HMRC can work from home two days a week. They use the same systems as they do in the office, and they are held to the same standard that they would experience when they are in the office.

Baroness Ritchie of Downpatrick Portrait Baroness Ritchie of Downpatrick (Lab)
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My Lords, the media reports yesterday said that people who are unable to get online will still get assistance from staff during office hours, although it is not immediately clear how that will work. Given that more than 12 million people are required to complete self-assessment forms every year, maybe the Minister could advise your Lordships’ House about the discussions that have taken place with HMRC to facilitate all the people requiring self-assessment, particularly those who do not have online access and who need, by law, to complete such forms.

Baroness Vere of Norbiton Portrait Baroness Vere of Norbiton (Con)
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I am incredibly happy to do that. Of the self-assessment tax returns that were submitted on time, 97% were done online, so just 3% were not. HMRC has an entire focus on the 120,000 people who are vulnerable or digitally excluded. It is those people whom HMRC wishes to target its resources on. Some 3 million calls were received last year, which took 500 full-time equivalents an entire year to answer. Those calls were people phoning up to ask how to change their password, how to get their tax code, or what their national insurance number was. That can be done online. Those who can access the online services really must do.

Lord Brownlow of Shurlock Row Portrait Lord Brownlow of Shurlock Row (Con)
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My Lords, I pay tribute to my noble friend Lord Cormack. What a privilege it was, along with others from your Lordships’ House and the other place, to be at his funeral yesterday in Lincoln Cathedral.

Is my noble friend the Minister satisfied and content with the advice given by the current board of HMRC? I declare my interest of having worked on a private sector board with a current member of the HMRC board.

Baroness Vere of Norbiton Portrait Baroness Vere of Norbiton (Con)
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The HMRC board as currently constituted is advisory. I know that my colleague the Financial Secretary to the Treasury is taking a keen interest in the strategy and its operationalisation within the HMRC. I expect that we will see some improvement shortly.

Earl of Clancarty Portrait The Earl of Clancarty (CB)
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My Lords, I thank the Minister very much for helping to facilitate the meeting on A1 forms that parliamentarians had with the Financial Secretary to the Treasury, but a specific concern of users was very much the lack of a helpline, so what I am hearing at the moment is concerning.

Baroness Vere of Norbiton Portrait Baroness Vere of Norbiton (Con)
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The helplines that would have closed relate to VAT and PAYE and self-assessment. HMRC is putting in various digital solutions to ensure that people can access A1 forms as quickly as possible and, as with all other forms of tax, accessing online is quicker, can be more convenient and certainly offers the best value for money for the taxpayer.

Lord Watts Portrait Lord Watts (Lab)
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My Lords, is it not the case that the people who carried out this assessment are the same people who have been failing the public for many years? Who carried that assessment out? Does the Minister understand that many people who try to contact the tax office do so after they have failed to get through or get any answers from the online service?

Baroness Vere of Norbiton Portrait Baroness Vere of Norbiton (Con)
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I accept that that can be the case. There is a digital assistant in the first instance, which is like a chatbot which can help with very simple inquiries; then it goes on to web chat; and then if the person on the other end of the web chat says that they cannot help, of course one is then able to phone HMRC. HMRC monitors all its channels for levels of confidence, levels of access, emotional state, mental health capability, comprehension and disability, and those people are referred to the extra support service team.

Baroness Altmann Portrait Baroness Altmann (Con)
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My Lords, will my noble friend consider the increasing number of pensioners being dragged into the tax net as the tax threshold is frozen and the state pension has increased significantly? Many more will go into the tax zone and many will have never filled out a tax return in their life and have no idea that they are in line to pay tax. Yet, when they get a demand and a potential penalty, they will have nobody to phone; many of them will be unable to get online, and increasingly all it takes is a state pension plus a small extra income for them to come over the limit. Will the department consider some special measures to help those pensioners who are never going to get online? I would be grateful if the Minister would take that back to the department.

Baroness Vere of Norbiton Portrait Baroness Vere of Norbiton (Con)
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I accept that some pensioners will not be online but the vast majority are and will be able to access HMRC’s services. As I said previously, HMRC is trying to focus its resources on precisely the people that the noble Baroness is concerned about—those who are digitally excluded, whether they be pensioners or not, and those who are more vulnerable, again whether they be pensioners or not.

Third Reading
15:28
Lord True Portrait The Lord Privy Seal (Lord True) (Con)
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My Lords, I have it in command from His Majesty the King to acquaint the House that His Majesty, having been informed of the purport of the Digital Markets, Competition and Consumers Bill, has consented to place his interest, so far as it is affected by the Bill, at the disposal of Parliament for the purposes of the Bill.

Lord Offord of Garvel Portrait The Parliamentary Under-Secretary of State, Department for Business and Trade (Lord Offord of Garvel) (Con)
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My Lords, I will make a brief statement on the devolution status of the Bill. Parts 3, 4 and 5 of the Bill include provisions within the legislative competence of the Northern Ireland Assembly relating to consumer matters. The legislative consent process is not engaged in Scotland or Wales.

As noble Lords will be aware, the Executive and Assembly have only recently been restored in Northern Ireland. After the return of the Northern Ireland Assembly and Executive on 3 February, my ministerial colleague the Minister for Enterprise, Markets and Small Business wrote to his counterpart in Northern Ireland, seeking their agreement to initiate the legislative consent process and to support a legislative consent Motion in the Northern Ireland Assembly. Since then, my officials have been in regular contact with the Northern Ireland Civil Service and we are hopeful that the legislative consent process will progress swiftly over the coming weeks.

Although it has not been possible to secure consent by this time, we take great comfort from the engagement that has taken place with the Northern Ireland Civil Service throughout the passage of the Bill, including via correspondence between Permanent Secretaries. I take this opportunity to thank the officials in the Executive and express my gratitude for the close working to date. There has historically been a policy and enforcement imperative in Northern Ireland to maintain parity with Great Britain in relation to consumer protection matters. With the support of the Northern Ireland Office, my officials have liaised with the relevant Northern Ireland departments to ensure that the Bill considers and reflects the relevant aspects of devolved legislation. We remain committed to ensuring sustained engagement on the Bill with all three devolved Administrations as it progresses through Parliament.

Amendment 1

Moved by
1: After Clause 129, insert the following new Clause—
“Mergers involving newspaper enterprises and foreign powers(1) Schedule (Mergers involving newspaper enterprises and foreign powers) makes provision for the purposes of preventing foreign powers from gaining control or influence over newspaper enterprises.(2) The amendments made by that Schedule—(a) apply in relation to enterprises ceasing to be distinct on or after the effective date, but not in relation to enterprises ceasing to be distinct before the effective date;(b) apply in relation to arrangements in progress or in contemplation on or after the effective date which, if carried into effect, would result in the creation of a foreign state newspaper merger situation by virtue of enterprises ceasing to be distinct on or after the effective date.(3) In subsection (2), “the effective date” means 13 March 2024.”Member’s explanatory statement
This amendment, together with my amendment inserting a new Schedule after Schedule 6, makes provision for the purposes of preventing foreign powers from taking control of newspaper enterprises.
Lord Parkinson of Whitley Bay Portrait The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord Parkinson of Whitley Bay) (Con)
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My Lords, I am here to speak to the amendments in this group which stand in the name of my noble friend Lord Offord of Garvel, and I am happy to update your Lordships’ House on the work that has taken place since our debates on Report to implement a regime to ban foreign state ownership of newspapers and news magazines. As I noted on Report, we have heard the strength of concerns expressed in Parliament, and from my noble friend Lady Stowell of Beeston in particular, about foreign state ownership of UK newspapers and news magazines.

His Majesty’s Government agree that the importance of these publications to our democracy cannot be overstated: newspapers have always been, and must continue to be, free to develop relationships with their readers and develop editorial lines supporting different positions. The plurality of views across different newspapers ensures that there is a wide range of views supporting a culture of argument, debate and challenge, which in turn contributes to a healthy democratic society.

His Majesty’s Government are therefore taking steps to preserve the freedom of the press, recognising the risks that foreign state ownership of, or control or influence over, the UK’s newspapers and news magazines could pose to democracy and to free speech. Foreign state ownership, if used to develop or control narratives which align with another state’s interests, may over time corrode trust in our media as a whole. That is why many countries already have laws limiting foreign state ownership, and why we are creating a new regime which will prevent foreign states having any stake in a UK newspaper or news magazine.

These amendments will amend the Enterprise Act 2002 to create a new foreign state intervention regime for newspapers and news magazines, I am delighted that my noble friend Lord Forsyth of Drumlean has put his name to Amendment 1, which leads the amendments in this group. Getting from a regret amendment on the Media Bill to joint signatures on this Bill in a matter of weeks is testament to the collaboration we have had across your Lordships’ House in our discussions, and I thank him for that.

Under the new regime, the Secretary of State will be obliged to give the Competition and Markets Authority a foreign state intervention notice where she has reasonable grounds to believe that a merger involving a UK newspaper or news magazine has given, or would give, a foreign state or a person associated with a foreign state ownership, influence or control. The CMA will be obliged to investigate and provide a report to the Secretary of State on the merger or potential merger. If it concludes that the merger has resulted or would result in a foreign state newspaper merger situation, the Secretary of State will be required by the statutory provisions to make an order to block or unwind the merger.

Our amendments expand the definition of “foreign power” to capture a wide variety of actors, including senior members of a foreign Government and officers of a governing political party acting in a private capacity. The legislation will also apply to mergers involving persons associated with a foreign power to ensure that we are capturing all possible ways in which a foreign state could seek control or influence over a UK newspaper or news magazine. Direct investment in newspapers of any size will be banned in future under this new regime.

It is, however, essential that these new measures do not have undesired effects in relation to wider business investment in UK media. We will therefore introduce an exemption for investments where the stake is below 5% of the total investment being made. This would apply to passive investments by established and pre-existing sovereign wealth funds, pension funds or similar.

We will introduce this threshold by regulations made under the affirmative procedure, giving noble Lords and Members in another place the opportunity to scrutinise the detailed proposals. We will bring these regulations forward after Royal Assent to this Bill. My colleagues and I would be very happy to engage with noble Lords as we do so.

I make it clear that the regime brought about by these amendments, and the exemption which will be provided for in secondary legislation, applies only to newspapers and news magazines in order to safeguard our free press from government involvement, whether domestic or foreign.

As I have set out before, we already have a robust media mergers regime, which enables the Secretary of State to intervene if she believes that public interest considerations are, or may be, relevant to a merger. This new foreign state ownership regime works in parallel and complements the existing regime. Our focus is not on foreign investment in the UK media sector in general but is targeted specifically —noble Lords have rightly made the distinction—at foreign state investment in newspapers and news magazines.

Of course, the Government remain committed to encouraging and supporting investment into the United Kingdom. We recognise that investors deploying capital into this country rely on the predictability and consistency of our regulatory regime. The UK remains one of the most open economies in the world, and investment is crucial to our plans for growth and jobs, and for our prosperity. The UK has the highest stock of foreign direct investment in Europe. The recent Global Investment Summit signalled investors’ confidence, with nearly £30 billion in investment commitments being made. These amendments will not change the UK’s investment potential. As I said, we are targeting foreign state investment in a narrow but important part of the UK market to safeguard the health of our democracy.

As I noted on Report,

“the Secretary of State is currently considering a live merger case under the Enterprise Act regime on which I cannot comment further today. With regard to any live case, if it is still ongoing when the changes come into effect, the Secretary of State will continue to follow the process set out in the existing regime and will also apply the new measures”.—[Official Report, 13/3/24; cols. 2042-43.]

In tandem, I can confirm to your Lordships’ House that we will be consulting on expanding the media mergers and the new media foreign state ownership regime to apply to online news websites. This will bring the regimes up to date in order to reflect modern news consumption habits and better protect the freedom of our media.

I am grateful to my noble friends Lady Stowell and Lord Forsyth, to the noble Lord, Lord Bassam, and to others opposite and from across the House for their constructive engagement and collaboration on these amendments. I hope that they will enjoy your Lordships’ support.

Finally, I will briefly mention Amendment 4, tabled by my noble friend Lord Offord, which is not related specifically to foreign state ownership of media enterprises, but which is part of this group. Amendment 4 is a minor and technical amendment relating to other amendments made by Schedule 4 to the Bill. It clarifies how certain sections of the Enterprise Act 2002 are applied for the purposes of deciding if a special merger situation has been created under the special public interest merger regime. I beg to move.

Baroness Stowell of Beeston Portrait Baroness Stowell of Beeston (Con)
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My Lords, I thank my noble friend and his officials for the time and attention they have given this matter since Report. I know that officials have worked very hard, including over weekends, so I am truly grateful to them. I also pay tribute to the Media Minister, Julia Lopez. When I first met her to discuss my amendment three weeks ago, she gripped the issue immediately. I believe it is because of her energy and support for the clear objective of protecting press freedom that the Government have got behind her in bringing forward amendments in such a short space of time. Julia Lopez deserves much credit.

On the Government’s amendments, for me, the best way to understand their proposed way forward is to see it in two stages. Stage 1 deals with the block to foreign powers owning, controlling or influencing UK news. Stage 2 is the exemption for investment in UK news from legitimate foreign state investment funds. Both those stages, or parts, are important to the sustainability of the UK news industry.

I support the Government’s amendments as they relate to stage 1, and noble Lords will see that I have not retabled my own amendment. I am satisfied that they are in line with the promises my noble friend made from the Dispatch Box two weeks ago. In my view, they deal with the legal uncertainty that the RedBird IMI-proposed deal to buy the Telegraph titles and the Spectator has exposed when it comes to the involvement of foreign powers in our news media. It is worth restating that, as concerning as the UAE financial backing via IMI in that case is, the issue is bigger than that one deal and is a matter of principle.

As I understand the government amendments and what my noble friend has just said, the Government have broadened the definition of “foreign power”, and any individual or entity now captured by that definition will be blocked completely from owning, controlling or influencing our newspapers or news magazines. These provisions will take effect immediately once the Bill receives Royal Assent. Once completed, stage 1, as I might describe it, protects press freedom from the control or influence of foreign powers. Stage 2, which provides the exemption for legitimate, indirect foreign state investment funds to make passive investments in our news industry, will be covered by secondary legislation to follow once the Bill is enacted.

This exemption is important for obvious reasons, as my noble friend has already said. The news industry needs investment just like any other, and we must not exclude perfectly legitimate foreign state investors such as sovereign wealth funds or state pension funds that are not directly government controlled. As I said on Report, foreign state investment funds such as the Norwegian sovereign fund already invest in some of our news organisations.

I think I heard my noble friend set out the Government’s commitment to the threshold for this category of foreign state investors in the news industry being set at 5%. It is worth reflecting on that, because, at 5%, it is still above the approach of such funds which typically invest around 1 to 2% in corporations within any sector, yet it is a lower threshold than what is permitted by the CMA to prevent material influence, reflecting the fact that we are seeking to prevent any foreign state influence in UK news. I welcome the 5% threshold.

Obviously, we have yet to see the details of the secondary legislation, and Parliament will have to scrutinise that carefully before it can be approved. I welcome my noble friend’s commitment to engage Parliament before those regulations are laid. I think I heard my noble friend correctly, but can he reassure me that my understanding is correct that any individual or entity blocked at stage 1 will not qualify for exemption at stage 2? In other words, the exemption at stage 2 is for an entirely different kind of entity from that which will be blocked at stage 1.

I am pleased that my noble friend has reminded the House that any live regulatory case will be captured by the new legislation once it is enacted, and I am also pleased that he has confirmed that foreign state ownership of online UK news websites will be dealt with swiftly, also via secondary legislation and the affirmative procedure, once the Government have completed their consultation. There remains the question of foreign state ownership of our commercial public sector broadcasters and other commercial UK news channels. That said, of course, there are some regulatory protections already in broadcasting because of the Ofcom licensing regime. It would none the less be helpful if my noble friend could say whether the department is reviewing policy in this area also.

In conclusion, I will make three simple points. First, none of these legislative changes affect general foreign investment in or ownership of UK newspapers or news magazines, which is and will remain very welcome. Secondly, the exemption for legitimate investment by foreign state investment funds is important to the financial sustainability of our news industry. Finally, just to be clear, the UK remains open for business in the same way it has always been. All that Parliament is doing by making these changes is ensuring that our fundamental principle of press freedom is not up for sale.

I look forward to my noble friend’s replies to my questions, and we will, of course, review the secondary legislation carefully once it is ready. But, overall, I commend my noble friend on the Government’s work in recent weeks and I thank him for it.

15:45
Lord Forsyth of Drumlean Portrait Lord Forsyth of Drumlean (Con)
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My Lords, we are at Third Reading and this is not a time for long speeches, but I want to congratulate my noble friend and his colleagues on having listened to what was said. He remarked that I had gone from moving a regret amendment to signing an amendment. I gently point out that it is not me who has moved position.

I am struck by how the attempts to get this dealt with under both the Media Bill and this Bill came across the problems of the Long Title of the Bill and getting it in order. Going from an amendment that was 16 lines long to one that is 16 pages long tells us how much hard work has gone into this with the civil servants in both departments that are affected. It is fashionable to be rude about this place and the work it does, which I believe is outstanding, but it is even more fashionable these days, even among some Ministers, to criticise the Civil Service. To turn this around in this period, and to do it with such diligence and careful consideration, is a great tribute to the officials in those departments. It just goes to show that, contrary to what is believed, if Ministers give a clear view of what needs to be done, the Civil Service is more than capable of delivering that.

The noble Baroness, Lady Stowell, has done a fantastic job on this. I agree with everything that she said, and I see no need to repeat it. My understanding—I am very conscious of Pepper v Hart here—is that what the Minister has said from the Dispatch Box is absolutely clear. I have to say that, when I read the amendment, I thought, “Is this secondary legislation a Maginot line that will enable a future Government to get around the clear principle that no foreign Government should be able to own or influence in any way a newspaper or a news magazine?” The words that have been stated from the Dispatch Box make me confident that that is not the position. That has to be right. After yesterday’s events, it is inconceivable that the Chinese Government could own 1% or even one share of a British newspaper.

The carve-out is sensible, if sensibly applied, and there will be an opportunity for this House and the other place to consider it. I very much look forward to this legislation receiving Royal Assent, which will mean that there is a complete ban on any foreign Government having either ownership or influence over our press. That must be right in a free and democratic society.

Lord Faulks Portrait Lord Faulks (Non-Afl)
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My Lords, I also pay tribute to the Government, Ministers, officials and lawyers for their speedy response to the amendment put down on Report by the noble Baroness, Lady Stowell, and others. I declare an interest as the chair of the Independent Press Standards Organisation, which regulates 95% of the printed press and its online manifestations.

I shared with many other noble Lords concern about the prospective acquisition of the Daily Telegraph and the Spectator by the United Arab Emirates—or at least the acquisition of a substantial part of those important titles. It seems to me that this amendment will make this sort of acquisition much more difficult, if not impossible, as soon as the Bill becomes law.

I agree with other noble Lords that it is most important in framing the necessary secondary legislation that the driving principle behind the amendment, which is to prevent foreign state ownership of newspapers, is reflected appropriately. There is a risk that too tightly drawn definitions might catch wholly benign investors who might have a very modest and non-active interest in newspaper organisations. Sovereign wealth funds have already been mentioned, and the noble Lord has given assurances in this area. I do not entirely agree with the noble Lord, Lord Forsyth, in his citation of Pepper v Hart and its importance, but none the less we will be much reassured by anything the Minister might say. I also ask him to consider the position of banks which may provide a newspaper organisation’s finance. Banks are often part of a consortium, and one part of a consortium may well be a bank with a connection to a foreign state. It is important that that is not captured.

There has been a deliberate choice by those drafting these amendments to change the language of the Enterprise Act 2002, which speaks of “material influence” to provide in the amendment that a relevant merger situation arises where one party acquires “influence” over another. That is plainly a much lower bar. I imagine that the change is designed to protect against somewhat unconvincing assertions by prospective acquirers of an interest in newspapers that editorial independence is protected by some form of editorial board or other Chinese wall. I welcome the Minister’s clarification on this.

The definition of a newspaper in the amendment is,

“a news publication circulating wholly or mainly in the United Kingdom or in a part of the United Kingdom on any periodic basis”.

That seems to exclude news websites or broadcasters. News websites are increasingly a source of news for consumers, many whom have deserted conventional newspaper models. It may be that more power and influence can in fact be obtained there than in the traditional format. I hope that the Minister can continue to reassure the House that these websites are in the Government’s sights, simply on the basis of consistency. I venture to suggest that the Media Bill might provide an appropriate parent for relevant provisions to bring websites into the same category as newspapers. I welcome clarification on that.

The provisions make it clear that the Secretary of State must—I emphasise the word “must”—

“make an order … reversing or preventing … the foreign state newspaper merger situation”.

There is no discretion here. That makes it all the more important that any exemptions should provide that remote or benign interest in newspapers by various emanations of foreign states will not necessarily fall foul of these provisions.

I would like to make it clear that I am entirely in favour of the thinking which animates this amendment, but it is inevitable that when an amendment is drafted, at considerable pace, at a late stage in the progress of a Bill, there may be gaps or ambiguities. Freedom from state interference is of fundamental importance. Our newspaper industry is not in anything like the healthy state it once was, and its vulnerability is what makes newspapers potentially prey to outside investment from foreign states which seek influence. However, important though it is to keep our newspapers free of such influence, we want them to survive and, indeed, to prosper. I hope that the amendment entirely comprehends that aim.

Finally, I simply ask for clarity—the drafting is impressive, but sometimes the meaning is a little hard to tease out—on how the Minister envisages parliamentary involvement in the case of a contentious merger situation.

Lord Lansley Portrait Lord Lansley (Con)
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My Lords, I intervene just briefly. I am very pleased to take the opportunity to follow what the noble Lord, Lord Faulks, was just saying because it touches directly on the points I was going to make.

First, I am very grateful for the conversations I have had with the noble Lord and Minister Lopez in his department. I look forward to further debate about the extension to online news services. It will certainly be my intention to table amendments to the Media Bill to enable us to consider how the media public interest test is to be applied in relation to this wider definition of news providers, since the definitions are clearly now out of date—I can say that, having been part of the Puttnam committee on the 2003 legislation.

My noble friend has done an amazing piece of legislative work. I just have to ask, as I did on Report, why it would not have sufficed to have added a new specified consideration to Section 58 of the Enterprise Act 2002, in effect on the need to prevent the acquisition, control of, or influence over newspapers or newspaper periodicals by any defined foreign power. As my noble friend says, we have 16 pages; frankly, we could have done it in about three lines, but clearly there are differences in terms of the bar that has to be crossed and the requirement on the Secretary of State. As the noble Lord, Lord Faulks, said, the Secretary of State must do these things, as opposed to the discretion under the current merger regime, but it seems to me that, with a new specified consideration, the current merger regime would provide the necessary powers. For example, it was sufficient for the purpose of meeting the capability to deal with a public health emergency in Section 58 as a specified consideration, or to maintain the stability of our financial system, as specified after the financial crisis, in Section 58. I am not at all clear why we have departed from the same approach in this case. There is a risk that we end up with overlapping and very complex provisions relating to one type of merger situation as opposed to other merger situations, but we will come on to discuss that.

On Report, I raised with my noble friend the question of broadcasting. We can return to that in the Media Bill, but, of course, where broadcasters are concerned, we have the benefit of the relationship to the Ofcom standards code, which does not apply in relation to newspapers. I hope we can revisit that when we come to the Media Bill.

Lord Clement-Jones Portrait Lord Clement-Jones (LD)
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My Lords, I want to revert very briefly, and thank the noble Lord, Lord Offord, for his statement about the status of the Bill in Northern Ireland, before commenting on Amendment 1. I very much hope that those discussions go as quickly as possible in the circumstances. I also welcome the noble Lord, Lord Leong, back to the Opposition Front Benches, and hope that he is in much better form.

I start by congratulating the noble Baroness, Lady Stowell, and the noble Lords, Lord Forsyth, Lord Robertson, and Lord Anderson, on what is really a triumph. I thank the Minister, in particular, the noble Lord, Lord Parkinson, for producing something so comprehensive, and perhaps complicated. As someone who is rather used to replies such as “in due course” or “we’re going to produce guidance”, it just shows what government can do swiftly and decisively when it really gets the bit between its teeth. It means that we are not going to take many more excuses in future.

I very much hope that, as the noble Lords, Lord Faulks and Lord Lansley, said, we will not lose sight of the digital news media agenda as well, because it just demonstrates what is possible through this change to the Enterprise Act. There is a broader agenda, and that needs addressing. I very much hope that, as other noble Lords have said, the secondary legislation really is consistent with the intent demonstrated today, both in what the Minister had to say and in the intent of the proposers of the original amendment. It is very good that the Minister has, in a sense, confirmed that it will impact on the RedBird proposal, if that proposal is still current on the effective date, given the circumstances. I entirely agree with the noble Baroness, Lady Stowell, that this is a matter of principle; it is not about the particular country. However, I do feel strongly about the particular country, so in these circumstances, we are entitled to be pleased that this is going to be the case in terms of this particular transaction.

The noble Baroness raised questions about the threshold, and I very much hope that the Minister can answer them. I thank him, and I think there is general satisfaction across the House. This demonstrates what the Government can do when they get the bit between their teeth.

16:00
Lord Bassam of Brighton Portrait Lord Bassam of Brighton (Lab)
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My Lords, this has been a fascinating and illuminating series of speeches on the potential foreign ownership of UK news titles, particularly the Telegraph and the Spectator, by RedBird IMI. I echo the words of the noble Baroness, Lady Stowell: this is a much larger issue than that newspaper group. There is a fundamental principle involved here, which is why all sides of the House wanted to rally round the issue.

We have witnessed not only the magical transformation of the noble Lord, Lord Forsyth, from agent provocateur, but the Government moving at a speed we would welcome elsewhere in public policy; it is something to behold for the future. We have come to understand better just how complicated the terms of international trade are and how careful we need to be when legislating to prevent the law of unintended circumstances kicking in.

Protecting the freedom of the press—and our politics—from foreign state interference is an important issue. That is why we supported the calls for government action, an issue I raised in January, and for decisive intervention. As I carefully explained to your Lordships’ House last week, we supported the spirit of the amendment tabled by the noble Baroness, Lady Stowell, but not its detail. We on these Benches were genuinely concerned about security and the need to have a more comprehensive solution to the difficulties the Government face in tackling this issue. We can fairly say that those concerns have been more than adequately met with 16 pages of complex legislation, drafted magically by lawyers working at great pace; I congratulate them on that, and the officials in the Box. In particular, I congratulate the noble Baroness, Lady Stowell, and the noble Lord, Lord Forsyth, on his advocacy for this issue and his intelligence; both have applied pressure to secure a desirable outcome.

Most of the questions I wanted to ask have already been put, but I do have a few concerns, some of which have already been rehearsed in part. First, does the exemption referenced in the amendment cover just passive investments, and what would that mean in this context? Secondly, does it fully cover sovereign wealth funds and pension funds held by them, and what is their relationship with banks? Will there be a capping regime, and what will its thresholds be? Thirdly, will there be a 100% block on foreign state ownership, notwithstanding the 5% threshold the noble Baroness, Lady Stowell, mentioned? What action can the Minister spell out for us on online publications such as the Independent and online-only magazine titles? I liked the suggestion from the noble Lord, Lord Faulks, that this might be picked up in the Media Bill. Whether the Media Bill will enable that, given its long title et cetera, is obviously a question for the clerks, but one that we should certainly ask.

We on these Benches have been more than happy to lend our support to this issue because of the importance in our political landscape of protecting a free and independent press that is not handcuffed by our state. On such issues, it is vital that there is cross-party unanimity. I am sure that noble Lords opposite will, in the future, want to do all they can to protect the integrity of that position, should a paper perceived to be of a different political colour come under a similar threat, whenever that might be. With that said, we await the Minister’s reply to the questions asked, which need a response. I congratulate all those concerned on bringing this difficult situation to a happy conclusion.

Lord Parkinson of Whitley Bay Portrait Lord Parkinson of Whitley Bay (Con)
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My Lords, I am grateful to noble Lords for their support for these amendments and the work undertaken. I thank my noble friend Lady Stowell for commending the work of Julia Lopez, the media Minister, and indeed the department and the officials more broadly. My noble friend also acknowledged the specific quasi-judicial role of the Secretary of State in her ongoing determination of the case before her, but acknowledged that she obviously has a role in all this. On the broader question of media mergers, my right honourable friend the Secretary of State of course remains very much involved as well, but I thank my noble friend for her appreciation for both. I agree with my noble friend Lord Forsyth in his praise for the civil servants who worked thoroughly and quickly on this matter, including over Mother’s Day weekend. I am grateful for that recognition.

My noble friend Lord Forsyth rightly pointed out that he has not moved since tabling his regret amendment to the Media Bill. The Government have made explicit and put beyond doubt what was implicit and possible in the existing regime, as I set out on Report. We are very happy to take the opportunity to do that clearly, in the way that we do through these amendments, and, indeed, to set out now the new lower threshold. My noble friend Lady Stowell is right: we will set it at 5%, which is considerably lower than the existing threshold. I am glad that my noble friend welcomes that. She is right in the characterisation of what I said: anyone blocked at what she calls stage 1—the new automatic block on foreign state investment—will not be able to be exempted at what she calls stage 2. She is right, as well, to make the distinction between foreign investment and foreign state investment, and to make it clear, as I was very happy to, that the UK remains open for business. This is a discrete area and an important one in our national life, which is why we are acting in the way we have.

My noble friend Lord Faulks and the noble Lord, Lord Bassam, asked about the role of banks. We do not think that, in the ordinary course of events, debt and debt refinancing from foreign banks which have a state interest should be captured, unless the structure of the transaction gives rise to concerns about influence. We are considering precisely how debt and debt refinancing should be treated in cases where the structure of debt may give rise to concerns about foreign state investment organisations. But as I say, as we bring these provisions forward in secondary legislation, I am very happy to continue conversations with noble Lords and, indeed, to have conversations with those who will be directly affected.

My noble friend Lord Faulks invited me to set out what we are doing in consulting shortly on expanding the existing media mergers regime and the foreign state ownership provisions, to include online news websites. That will enable us to make changes that ensure that online news, whether from an established newspaper group or an online publisher, is covered by the media regime and the new measures we are introducing for foreign state media ownership.

The Secretary of State will maintain a quasi-judicial role in media mergers. The public interest regime will remain as it is, but we are adding a new parallel foreign state intervention regime. The Secretary of State will not have discretion under that; she will have to follow the report of the Competition and Markets Authority, both on whether there is a foreign state merger and an exemption. She would need to lay an order before Parliament to block a transaction, which would be under the negative procedure. We will debate what I have announced in the provisions that we will bring forward after Royal Assent, setting out an exemption for investments where the stake is below 5%, and noble Lords will have the opportunity to scrutinise that under the affirmative procedure.

I am grateful to noble Lords who have engaged with us and our officials in recent days as we work on these amendments. I am glad that they have your Lordships’ support. I beg to move.

Lord Forsyth of Drumlean Portrait Lord Forsyth of Drumlean (Con)
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Before my noble friend sits down, when can we expect the secondary legislation to appear?

Baroness Stowell of Beeston Portrait Baroness Stowell of Beeston (Con)
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Can I ask a question as well, to save the Minister from getting up several times? I do not think that he said anything about broadcasting. Where is the department on reviewing policy in that area?

Lord Bassam of Brighton Portrait Lord Bassam of Brighton (Lab)
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Can the Minister also clarify the point about online publications? Will these be included within the statutory instrument?

Lord Parkinson of Whitley Bay Portrait Lord Parkinson of Whitley Bay (Con)
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We will shortly consult on expanding the existing media mergers to look at online. The new regime will not cover TV and radio broadcasts at this time, but we will continue to consider that in our broader work on the media mergers regime. As my noble friend Lord Lansley pointed out, there are specific additional protections through the regime to which they are subject under Ofcom.

My noble friend Lord Forsyth rightly asks when we will bring in the secondary legislation. We want to do it after Royal Assent of this Bill, which is in the control of Parliament, not just the Government. Officials are working on it already. I cannot commit to a date for its introduction, but I am happy to commit to continuing our conversations as we work on it and before we introduce it after Royal Assent.

Lord Faulks Portrait Lord Faulks (Non-Afl)
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I have one more question, if I may? I asked about the change in wording in the Enterprise Act from “material influence” to “influence”. I suggested that there might be a reason behind that. Can the Minister clarify the thinking behind the change?

Lord Parkinson of Whitley Bay Portrait Lord Parkinson of Whitley Bay (Con)
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I will reply in writing, if my noble friend is happy with that, so that I can give him the legalese which he would want.

Amendment 1 agreed.
Clause 257: Content and timing etc of reminder notices
Amendment 2
Moved by
2: Clause 257, page 172, line 23, leave out paragraph (b) and insert—
“(b) in such a way that the information referred to in subsection (1) is more prominent than any other information given to the consumer at the same time, and”Member's explanatory statement
This amendment removes the prohibition against a trader giving a consumer any other information at the time they give a reminder notice but requires that the information that must be contained in a reminder notice must be more prominent than any other information that is given.
Lord Offord of Garvel Portrait Lord Offord of Garvel (Con)
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My Lords, I am delighted to move Amendment 2, which mirrors the intention of the amendment tabled by my noble friend Lord Lucas on Report on reminder notices, an amendment which was also supported by my noble friend Lord Black, the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Jones.

Amendment 2 would remove the requirement for businesses to send reminder notices separately from all other information. Instead, other information can be given at the same time as a reminder notice, so long as the required information is the most prominent information. This amendment will ensure that the Bill strikes a better balance between ensuring that consumers are reminded about their ongoing subscription while enabling businesses to streamline their communications and provide other information which they consider to be useful to consumers in these notices.

I hope that your Lordships agree that this amendment delivers upon the undertaking I made on Report to address this issue, and therefore that noble Lords will support it. I beg to move.

Lord Clement-Jones Portrait Lord Clement-Jones (LD)
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My Lords, I am delighted that the Minister has come back at Third Reading as he undertook to and that he has produced this amendment. I am only sorry that the noble Lord, Lord Lucas, is not present to be able to take the credit for it.

Baroness Jones of Whitchurch Portrait Baroness Jones of Whitchurch (Lab)
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My Lords, we welcome the Government’s amendment on subscription reminder notices. As has been said, the noble Lord, Lord Lucas, made a very sensible intervention when we debated this in Committee and on Report, and it provides a helpful clarification to service providers. I hope that this amendment and the other changes that we made on Report have now struck a much better balance between businesses’ needs and consumer interests.

We look forward to hearing details of the department’s further work on implementing the gift aid protections and other work on cancellation methods, but, for now, we are pleased with the progress that has been made on the Bill and we wish it a speedy onward passage.

Lord Offord of Garvel Portrait Lord Offord of Garvel (Con)
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I thank my noble friends Lord Black and Lord Lucas, and today the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Jones, for their continuing engagement on this topic and on the Bill more broadly. I am pleased they agree that the Government have achieved the right balance between business and consumers on reminder notices and that we have ensured that businesses’ communications with customers can be more streamlined.

Amendment 2 agreed.
Clause 338: Commencement
Amendment 3
Moved by
3: Clause 338, page 239, line 22, at end insert—
“(za) section (Mergers involving newspaper enterprises and foreign powers) (and Schedule (Mergers involving newspaper enterprises and foreign powers));”Member's explanatory statement
This amendment provides for the provision inserted by my amendments relating to foreign control of newspaper enterprises to come into force on the day on which this Bill is passed.
Amendment 3 agreed.
Schedule 4: Relevant and special merger situations
Amendment 4
Moved by
4: Schedule 4, page 250, line 9, at end insert—
“(3A) In subsection (5), after “deciding” insert “whether two or more enterprises have ceased to be distinct at a time or in circumstances falling within section 24,””Member's explanatory statement
This amendment clarifies that, following other amendments made by Schedule 4 to the Bill, section 59(5) to the Enterprise Act 2002, which refers to the creation of a relevant merger situation, also includes a reference to two or more enterprises ceasing to be distinct (which is a requirement for there to be a relevant merger situation).
Amendment 4 agreed.
Amendment 5
Moved by
5: After Schedule 6, insert the following new Schedule—
“ScheduleMergers involving newspaper enterprises and foreign powersIntroduction
1 In EA 2002, Part 3 (mergers) is amended as follows.Prohibition on newspaper enterprise mergers involving foreign powers
2 After Chapter 3 insert—“Chapter 3AMergers involving newspaper enterprises and foreign powers70A Intervention by the Secretary of State(1) The Secretary of State must give the CMA a notice (a “foreign state intervention notice”) if the Secretary of State has reasonable grounds for suspecting that it is or may be the case that—(a) a foreign state newspaper merger situation has been created, or(b) arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a foreign state newspaper merger situation.(2) A foreign state intervention notice must describe the foreign state newspaper merger situation to which it relates.(3) For the purposes of this Chapter a foreign state newspaper merger situation has been created where—(a) as a result of two or more enterprises ceasing to be distinct, a relevant merger situation would have been created by virtue of section 23(1) if the modifications in Schedule 6A had effect,(b) one of the enterprises concerned is a newspaper enterprise, and(c) as a result of the enterprises ceasing to be distinct, a foreign power is able to control or influence the policy of the person carrying on the newspaper enterprise, or is able to control or influence that policy to a greater extent.(4) Schedule 6B makes provision about the circumstances in which a foreign power is able to control or influence the policy of a person for the purposes of this section (and references to a foreign power being able to control or influence the policy of a person to a greater extent are to be interpreted accordingly).(5) A foreign state intervention notice—(a) comes into force when it is given, and(b) ceases to be in force when the matter to which it relates is finally determined under this Chapter (see section 70F).70B Investigation and report by the CMA(1) Where the Secretary of State gives the CMA a foreign state intervention notice, the CMA must, within such period as the Secretary of State may require, give the Secretary of State a report in relation to the case.(2) The report must include—(a) a summary of representations relevant to the case that have been received by the CMA, and(b) a decision as to whether the CMA believes that—(i) a foreign state newspaper merger situation has been created, or(ii) arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a foreign state newspaper merger situation. (3) The CMA must carry out such investigations as it considers appropriate for the purposes of producing a report under this section.(4) For the purposes of its investigation the CMA must invite representations from the enterprises concerned in the case.70C Intervention to prevent foreign control of a newspaper enterprise(1) Subsection (2) applies where the Secretary of State has received a report under section 70B stating that the CMA believes that—(a) a foreign state newspaper merger situation has been created, or(b) arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a foreign state newspaper merger situation.(2) The Secretary of State must make an order containing such provision as the Secretary of State considers reasonable and practicable for the purposes of reversing or preventing the creation of the foreign state newspaper merger situation identified in the report.(3) An order under subsection (2) may contain—(a) anything permitted by Schedule 8 (provision that may be contained in certain enforcement orders), and(b) such supplementary, consequential or incidental provision as the Secretary of State considers appropriate.(4) An order under subsection (2)—(a) comes into force at such time as is determined by or under the order, and(b) may be varied or revoked by another order.(5) Paragraph 2 of Schedule 7 (enforcement regime for public interest and special public interest cases: order for the purposes of preventing pre-emptive action)—(a) applies in relation to a foreign state intervention notice as it applies in relation to an intervention notice, and(b) for this purpose, is to be read as if—(i) sub-paragraph (10) were omitted;(ii) for sub-paragraph (12), there were substituted—“(12) In this paragraph “pre-emptive action” means action which might prejudice a foreign state intervention notice or a report under section 70B, or might impede the taking of any action under this Part in relation to such a notice or report”70D Other powers under this Part(1) Nothing in this Chapter limits the exercise of powers in relation to a foreign state newspaper merger situation under other provisions of this Part.(2) The powers in this Chapter may be exercised in relation to a foreign state newspaper merger situation regardless of whether any other power under this Part has been exercised in relation to the case.(3) The CMA must, in considering whether to make a reference under section 22 or 33, bring to the attention of the Secretary of State any case which it believes may be relevant to the duty in section 70A(1).70E Meaning of “foreign power”(1) In this Chapter, “foreign power” means—(a) the sovereign or other head of a foreign state in their public or private capacity,(b) a foreign government or part of a foreign government,(c) the head or senior members of a foreign government in their private capacity,(d) an agency or authority of a foreign government, or of part of a foreign government, (e) the head or senior members of an agency or authority of a foreign government, or of part of a foreign government, in their private capacity,(f) an authority responsible for administering the affairs of an area within a foreign country or territory, or persons exercising the functions of such an authority,(g) a political party which is a governing political party of a foreign government, or(h) the officers of a political party, which is a governing political party of a foreign government, in their private capacity.(2) A political party is a governing political party of a foreign government if persons holding political or official posts in the foreign government or part of the foreign government—(a) hold those posts as a result of, or in the course of, their membership of the party, or(b) in exercising the functions of those posts, are subject to the direction or control of, or significantly influenced by, the party.(3) In this section—“foreign country or territory” means a country or territory outside the United Kingdom, the Channel Islands, the Isle of Man or the British Overseas Territories;“foreign government” means the government of a foreign country or territory;a“government” includes persons exercising the functions of a government;“territory” includes the constituent territories of a federal state.70F Other interpretation(1) For the purposes of this Chapter, section 44(10) is to be read as if the definition of “newspaper” included a news publication circulating wholly or mainly in the United Kingdom or in a part of the United Kingdom on any periodic basis.(2) For the purposes of this Chapter, a matter is finally determined when the Secretary of State—(a) makes an order under section 70C(2), or(b) publishes under section 107 a report of the CMA under section 70B which the Secretary of State has received and which states that the CMA has decided that the CMA believes that—(i) no foreign state newspaper merger situation has been created, or(ii) no arrangements are in progress or in contemplation which, if carried into effect would result in the creation of a foreign state newspaper merger situation.70G Regulations(1) The Secretary of State may by regulations change the meaning of—(a) “foreign power”, or(b) “newspaper”,for the purposes of this Chapter.(2) Regulations under subsection (1)(a) may, among other things—(a) provide for a description of person to be treated as if they were not a foreign power, and(b) frame any such description by reference to—(i) the independence of persons from other descriptions of foreign power, or(ii) the interest which persons have in a newspaper enterprise.(3) The Secretary of State may by regulations apply any provision made by or under Chapter 1, with or without modifications, for the purposes of this Chapter (including by way of amendments to the modifications in Schedule 6A).(4) Regulations under this section may, among other things, make provision having effect on or after 13 March 2024.”3 After Schedule 6 insert—“Schedule 6ADetermination of when a foreign state newspaper merger situation has been createdApplication of sections 23 to 29
(1) Sections 23 to 29 apply for the purposes of Chapter 3A of Part 1, subject to the following modifications.(2) Section 23 is to be read as if—(a) in subsection (1), for the amount in paragraph (b), there were substituted “£2 million”;(b) in subsection (9), for paragraphs (a) and (b), there were substituted—“(a) in relation to the giving of a foreign state intervention notice, the time when the notice is given;(b) in relation to the giving of a report by the CMA under section 70B, the time of the giving of the report.”(3) Section 24 is to be read as if—(a) for subsection (1)(a) there were substituted—“(a) the two or more enterprises ceased to be distinct enterprises before the day on which—(i) in a case to which section 23(9)(a) applies, the foreign state intervention notice relating to them is given, or(ii) in a case to which section 23(9)(b) applies, the CMA gives its report relating to them under section 70B,and did so not more than four months before that day; or”;(b) in subsection (1)(b), after “distinct enterprises” there were inserted “, including facts about whether or the extent to which a foreign power is able to control or influence the policy of a person carrying on a newspaper enterprise as a result of the enterprises ceasing to be distinct enterprises,”;(c) the reference to the CMA in subsection (2)(a) included a reference to the Secretary of State;(d) for subsection (2)(b) there were substituted—“(b) it is given to the Secretary of State or the CMA more than four months before the day on which—(i) in a case to which section 23(9)(a) applies, the foreign state intervention notice relating to them is given, or(ii) in a case to which section 23(9)(b) applies, the CMA gives its report relating to them under section 70B; or(c) the facts are made public more than four months before the day on which—(i) in a case to which section 23(9)(a) applies, the foreign state intervention notice relating to them is given, or(ii) in a case to which section 23(9)(b) applies, the CMA gives its report relating to them under section 70B.”(4) Section 25 is to be read as if—(a) subsections (4) and (5) were omitted;(b) the powers to extend time-limits under section 25 were not exercisable by the CMA before the giving of a foreign state intervention notice by the Secretary of State.(5) Section 26 is to be read as if—(a) in subsection (3)—(i) “materially” were omitted; (ii) for “may, for the purposes of subsections (1) and (2), be treated” there were substituted “is to be treated, for the purposes of subsections (1) and (2),”;(b) for subsection (4) there were substituted—“(4) For the purposes of subsection (1), in so far as it relates to bringing two or more enterprises under common control, where a foreign power is already able to control or influence the policy of a person carrying on a newspaper enterprise to some extent, the foreign power is to be treated as bringing the newspaper enterprise under its control if anything is done which results in the foreign power being able to control or influence the policy of that person to a greater extent (whether by virtue of acquiring more shares or voting rights in the person, directly or indirectly, or otherwise).”(6) Section 27 is to be read as if—(a) references to the “decision-making authority” were to “the CMA or the Secretary of State”;(b) in subsection (5), for “a reference” there were substituted “deciding whether or when a foreign state newspaper merger situation has been created”.(7) Section 28 is to be read as if, in subsection (4), the reference to the “decision-making authority” were to “the CMA or the Secretary of State”.(8) Section 29 is to be read as if—(a) in subsection (1)—(i) the reference to the “decision-making authority” were to “the CMA or the Secretary of State”;(ii) for “a reference” there were substituted “deciding whether or when a foreign state newspaper merger situation has been created”;(b) in subsection (2)(a)(i) “materially” were omitted;(c) in subsection (2)(a)(ii), for “degree” there were substituted “extent”;(d) subsection (2)(b) and (3) were omitted.Application of the Enterprise Act 2002 (Anticipated Mergers) Order 2003 (S.I. 2003/1595)
(1) The Enterprise Act 2002 (Anticipated Mergers) Order 2003 applies for the purposes of Chapter 3A of Part 1, subject to the following modifications.(2) In Article 3, the words before paragraph (a) are to be read as if, for “in relation to references and notices”, there were substituted “for the purposes of Chapter 3A of Part 1 of the Act”.(3) Article 3(a) is to be read as if—(a) in the substituted version of section 27(5), for “a reference” there were substituted “deciding whether or when a foreign state news paper merger situation will be created”;(b) the substituted version of section 27(6)(a)(i), for “the reference” there were substituted “the foreign state intervention notice relating to the situation”.(4) Article 3(b) is to be read as if—(a) in the substituted section 29(2)(a)(i), “materially” were omitted;(b) in the substituted section 29(2)(a)(ii), for “degree” there were substituted “extent”;(c) in the substituted section 29(4), for “the reference” there were substituted “the foreign state intervention notice”.Schedule 6BControl or influence of a person by a foreign powerPart 1Conditions for control or influence(1) A foreign power is able to control or influence the policy of a person for the purposes of section 70A if one or more of the following conditions is met. (2) Condition 1 is that the foreign power holds, directly or indirectly, any of the shares in the person.(3) Condition 2 is that the foreign power holds, directly or indirectly, any of the voting rights in the person.(4) Condition 3 is that the foreign power holds the right, directly or indirectly, to appoint or remove an officer of the person.(5) Condition 4 is that the foreign power has the right or ability to direct, control or influence to any extent, the person's policy or activities (in whole or in part, and whether directly or indirectly), despite not meeting condition 1, 2 or 3.(6) Condition 5 is that—(a) the trustees of a trust, or the members of a partnership, unincorporated association or other entity, that is not a legal person under the law by which it is governed, would, if they were a foreign power, meet one or more of conditions 1 to 4 (in their capacity as such) in relation to the person, and(b) the foreign power has the right or ability to direct, control or influence to any extent the activities of that trust or entity (in whole or in part, and whether directly or indirectly), or has any other interest in, or right over or in relation to, the trust or entity, or any of the trustees of the trust or the members of the entity, whether directly or indirectly.2 In this Schedule, “officer”—(a) in relation to a body corporate, means a director, member of the committee of management, chief executive, manager, secretary or other similar officer of the body, or a person purporting to act in any such capacity;(b) in relation to a partnership, means a partner, a person purporting to act as a partner or a person concerned in the management or control of the partnership or who purports to act in the capacity of a person so concerned;(c) in relation to an unincorporated association other than a partnership, means a person who is concerned in the management or control of the association or purports to act in the capacity of a person so concerned.Part 2InterpretationInterpretation
3 This Part makes provision about the interpretation of this Schedule.Joint interests
4 If a foreign power holds a share or right jointly with another person (whether or not a foreign power), each of those persons is to be taken to hold that share or right.Joint arrangements
5 (1) If shares or rights held by a foreign power and shares or rights held by another person (whether or not a foreign power) are the subject of a joint arrangement between those persons, each of those persons is to be taken to hold the combined shares or rights of both persons.(2) A “joint arrangement” is an arrangement between the holders of shares (or rights) that they will exercise all or substantially all the rights conferred by their respective shares (or rights) jointly in a way that is pre-determined by the arrangement.(3) For the meaning of “arrangement”, see paragraph 12.Calculating shareholdings
6 (1) In relation to a person that has a share capital, a reference to holding any of the shares in that person is to holding any shares comprised in the issued share capital of that person. (2) In relation to a person that does not have a share capital, a reference to holding any of the shares in that person is to holding a right to share to any extent in the capital or, as the case may be, profits of that person.Voting rights
7 (1) A reference to the voting rights in a person is to the rights conferred on shareholders in respect of their shares (or, in the case of a person not having a share capital, on members) to vote at general meetings of the person on all or substantially all matters.(2) In relation to a person that does not have general meetings at which matters are decided by the exercise of voting rights, a reference to exercising voting rights in the person is to be read as a reference to exercising rights in relation to the person that are equivalent to those of a person entitled to exercise voting rights in a company.8 In applying this Schedule, voting rights in a person held by the person itself are to be disregarded.Shares or rights held “indirectly”
9 (1) A foreign power holds a share “indirectly” if the foreign power has any stake in a person and that person—(a) holds the share in question, or(b) is part of a chain of persons—(i) each of which (other than the last) has any stake in the person immediately below it in the chain, and(ii) the last of which holds the share.(2) A foreign power holds a right “indirectly” if the foreign power has any stake in a person and that person—(a) holds that right, or(b) is part of a chain of persons—(i) each of which (other than the last) has any stake in the person immediately below it in the chain, and(ii) the last of which holds that right.(3) For the purposes of sub-paragraphs (1) and (2), a person (“A”) has “any stake” in another person (“B”) if—(a) A holds any shares or voting rights in B,(b) A is a member of B and has the right to appoint or remove an officer of B,(c) A is a member of B and controls alone, or pursuant to an agreement with other shareholders or members, any of the voting rights in B, or(d) A has the right or ability to control or influence B to any extent, despite not being within paragraph (a), (b) or (c).Shares held by nominees
10 A share held by a person as a nominee for another is to be treated as held by the other (and not by the nominee).Rights treated as held by person who is able to control their exercise
11 (1) Where a person controls a right, the right is to be treated as held by that person (and not by the person who in fact holds the right, unless that person also controls it).(2) A person “controls” a right if, by virtue of any arrangement between that person and others, the right is exercisable only—(a) by that person,(b) in accordance with that person’s directions or instructions, or(c) with that person’s consent or concurrence. Arrangements
12 (1) For the purposes of this Schedule, “arrangement” includes—(a) any scheme, agreement or understanding, whether or not it is legally enforceable, and(b) any convention, custom or practice of any kind.(2) But something does not count as an arrangement unless there is at least some degree of stability about it (whether by its nature or terms, the time it has been in existence or otherwise).Rights exercisable only in certain circumstances etc
13 (1) Rights that are exercisable only in certain circumstances are to be taken into account only—(a) where the circumstances have arisen, and for so long as they continue to obtain, or(b) when the circumstances are within the control of the person having the rights.(2) But rights that are exercisable by an administrator or by creditors while a person is in relevant insolvency proceedings are not to be taken into account even while the person is in those proceedings.(3) “Relevant insolvency proceedings” means—(a) administration within the meaning of the Insolvency Act 1986,(b) administration within the meaning of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), or(c) proceedings under the insolvency law of another country or territory during which a person’s assets and affairs are subject to the control or supervision of a third party or creditor.(4) Rights that are normally exercisable but are temporarily incapable of exercise are to continue to be taken into account.Rights attached to shares held by way of security
14 Rights attached to shares held by way of security provided by a person are to be treated for the purposes of this Schedule as held by that person—(a) where apart from the right to exercise them for the purpose of preserving the value of the security, or of realising it, the rights are exercisable only in accordance with that person’s instructions, and(b) where the shares are held in connection with the granting of loans as part of normal business activities and apart from the right to exercise them for the purpose of preserving the value of the security, or of realising it, the rights are exercisable only in that person’s interests.Part 3Power to amend circumstances in which there is control or influence15 (1) The Secretary of State may by regulations make provision—(a) to change (by increasing or decreasing) the proportion of shares or rights which a foreign power must hold in a person carrying on a newspaper enterprise, whether directly or indirectly, in order for the foreign power to be able to control or influence the policy of a person for the purposes of section 70A;(b) to change (by increasing or decreasing) the proportion of shares or rights which is to be held by persons in a chain of persons for the purposes of determining whether shares or rights are held indirectly;(c) about assumptions which are to be made when determining whether a foreign power is able to control or influence the policy of a person, including assumptions framed by reference to the ownership of shares or voting rights by any person; (d) about the extent to which a foreign power needs to be able to control or influence the policy of a person in order to control or influence that policy for the purposes of section 70A, including provision about a foreign power that is already able to control or influence the policy of a person to some extent being able to control or influence that policy to a greater extent;(e) to change or supplement Part 1 of this Schedule so as to include circumstances (for example, circumstances involving more complex structures) that give a foreign power a level of control or influence in relation to the policy of a person broadly similar to the level of control or influence given by the conditions in paragraph 1;(f) in consequence of any provision made by virtue of paragraph (e), to change or supplement Part 2 of this Schedule so that circumstances specified in that Part in which a person is to be regarded as holding an interest in another person correspond to any of the conditions in paragraph 1, or would do so but for the extent of the interest.(2) The provision that may be made under this paragraph, read with section 124(2)(a), includes—(a) different provision for different descriptions of foreign power, and(b) different provision for different persons or descriptions of person in a chain of persons.(3) Regulations under this paragraph may, among other things—(a) confer a discretion on the CMA;(b) make provision having effect on or after 13 March 2024.”Further amendments
(1) In section 86 (enforcement orders: general provisions), in subsection (6), after “section” insert “70C,”.(2) In section 88 (contents of certain enforcement orders), in subsection (1), after “section” insert “70C, ”.(3) In section 94(8) (rights to enforce certain orders)—(a) after “made by the Secretary of State under” insert “section 70C(2),”;(b) for “paragraph 2 of that Schedule” substitute “paragraph 2 of Schedule 7”.(4) In section 107 (further publicity requirements)—(a) in subsection (3), after paragraph (g) insert—“(ga) any foreign state intervention notice given by the Secretary of State;(gb) any report of the CMA under section 70B which the Secretary of State has received;”(b) after subsection (11) insert—“(12) The Secretary of State must publish any report of the CMA under section 70B which the Secretary of State has received within the period of 7 days beginning with the day on which the Secretary of State receives the report.”(5) In section 109 (attendance of witnesses and production of documents etc), in subsection (A1)(b), at the end insert “or a foreign state intervention notice under section 70A”.(6) In section 110A (restriction on powers to impose penalties under section 110), after subsection (8) insert—“(8A) Where the section 109 power is exercised for the purpose mentioned in section 109(A1)(b) in connection with a matter that is the subject of a foreign state intervention notice under section 70A, the relevant day is the day when the matter to which the notice relates is finally determined under Chapter 3A (see section 70F).” (7) In section 118 (excisions from reports), in subsection (1)—(a) omit the “or” at the end of paragraph (aa), and(b) at the end of paragraph (b) insert “, or(c) a report of the CMA under section 70B.”(8) In section 120 (review of decisions under Part 3), in subsection (1A), after paragraph (a) insert—“(aa) a decision of the CMA or the Secretary of State in connection with a foreign state newspaper merger situation;”.(9) In section 124 (orders and regulations under Part 3)—(a) in subsection (3)—(i) after “59(6A)” insert “, 70G”;(ii) after “above)” insert “, or paragraph 15 of Schedule 6B,”;(b) in subsection (5), after “65(3)),” insert “70C”;(c) after subsection (6) insert—“(6A) A statutory instrument containing regulations under section 70G or paragraph 15 of Schedule 6B may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”(d) in subsection (10), after “58(3)” insert “or 70G, or paragraph 15 of Schedule 6B”.(10) In section 127 (associated persons), in subsection (1)—(a) omit the “and” at the end of paragraph (aa), and(b) after that paragraph insert—“(ab) for the purposes of section 70A(3);”(11) In section 129 (other interpretation provisions), in subsection (1), at the appropriate place insert—““foreign state intervention notice” means a notice under section 70A(1);“foreign state newspaper merger situation” is to be interpreted in accordance with section 70A(3);”(12) In the table in section 130 (index of defined expressions), at the appropriate place insert—

“Foreign state intervention notice

Section 70A(1)

Foreign state newspaper merger situation

Section 70A(3)”

(13) In Schedule 8 (provision that may be contained in certain enforcement orders), in paragraph 20A (newspaper mergers), after sub-paragraph (1) insert—“(1A) This paragraph also applies in relation to an order under section 70C(2) (order to prevent foreign control of a newspaper enterprise).”(14) In Schedule 10 (procedural requirements for certain enforcement undertakings and orders)—(a) in paragraph 1(b), for “section 75” substitute “section 70C, 75”;(b) in paragraph 6(b), for “section 75” substitute “section 70C, 75”.”Member's explanatory statement
See my amendment inserting a new clause after clause 129.
Amendment 5 agreed.
Schedule 12: Service and extra-territoriality of notices under CA 1998 and EA 2002
Amendment 6
Moved by
6: Schedule 12, page 306, line 24, after “68C” insert “, or a foreign state intervention notice has been given under section 70A(1),”
Member's explanatory statement
This amendment is consequential on my amendment inserting a new Schedule after Schedule 6.
Amendment 6 agreed.
Schedule 13: Orders and regulations under CA 1998 and EA 2002
Amendments 7 to 9
Moved by
7: Schedule 13, page 308, leave out line 35 and insert—
“(6) For subsection (6A) substitute—”Member's explanatory statement
This amendment is consequential on my amendment inserting a new Schedule after Schedule 6.
8: Schedule 13, page 308, line 36, after “section” insert “70G,”
Member's explanatory statement
This amendment is consequential on my amendment inserting a new Schedule after Schedule 6.
9: Schedule 13, page 308, line 36, after “111(7A)” insert “, or paragraph 15 of Schedule 6B,”
Member's explanatory statement
This amendment is consequential on my amendment inserting a new Schedule after Schedule 6.
Amendments 7 to 9 agreed.
16:15
Motion
Moved by
Lord Offord of Garvel Portrait Lord Offord of Garvel
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That the Bill do now pass.

Lord Offord of Garvel Portrait Lord Offord of Garvel (Con)
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My Lords, I add my thanks to all noble Lords who have been involved in the diligent scrutiny we have given the Bill in recent months. The Digital Markets, Competition and Consumers Bill will drive innovation and deliver better outcomes for consumers by addressing barriers to competition in digital markets and tackling consumer rip-offs. I am very grateful to noble Lords for the dedication, attention and time that they have given to the Bill before your Lordships’ House.

I want to express my particular appreciation to Members on the Front Benches, including the noble Baroness, Lady Jones of Whitchurch, and the noble Lords, Lord Stevenson of Balmacara, Lord Bassam of Brighton, Lord Clement-Jones and Lord Fox, for the courteous and constructive manner in which they have engaged with me on the Bill. I wish to extend my sincere thanks to my noble friends Lady Stowell and Lady Harding of Winscombe, and to the noble Baroness, Lady Kidron, for their invaluable contributions and clarity of views both during the debate and outside it. I emphasise my gratitude to the noble Lords, Lord Faulks, Lord Tyrie, Lord Kamall, Lord Holmes of Richmond, Lord Lansley, Lord Vaizey of Didcot, and the noble Viscount, Lord Colville of Culross, for their detailed consideration of Part 1 of the Bill. I am very grateful to them all; they have asked important questions and given much time and energy to the Bill, and it is a better Bill for that.

My noble friend Lord Lindsay and the noble Baronesses, Lady Crawley, Lady Bakewell and Lady Hayman, have championed consumer issues, for which I am most grateful. I also pay tribute to the noble Baroness, Lady Bennett of Manor Castle, for raising the important issue of net zero.

On Report, the Government made a number of amendments to the Bill with regards to subscription contracts. I thank my noble friends Lord Black of Brentwood and Lord Lucas for their engagement and collaboration on these issues. I am also most grateful to my noble friend Lord Mendoza for his work in highlighting the Bill’s impact on the ability of charities to claim gift aid.

On the issue of foreign states acquiring UK news organisations, to which my noble friend Lord Parkinson has spoken, I again thank my noble friend Lady Stowell of Beeston and the noble Lords, Lord Forsyth of Drumlean and Lord Robertson of Port Ellen, who so passionately highlighted the principle of freedom of the press.

I conclude by recording my gratitude for the invaluable support and assistance of my noble friend Lord Camrose. I put on the record my thanks to the Bill team, my private office, and all the officials and lawyers in the Department for Business and Trade, the Department for Science, Innovation and Technology, and the Competition and Markets Authority, who have provided such thorough support and expertise. I beg to move that the Bill do now pass.

Baroness Stowell of Beeston Portrait Baroness Stowell of Beeston (Con)
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I hesitate to rise, because I realise I am probably testing the patience of the House, having already spoken in Third Reading. I just wanted to say a couple of things.

I thank my noble friends Lord Camrose and Lord Offord on the Front Bench for their work on this Bill. As they will know, this is legislation for which the Communications and Digital Committee has been calling for several years—it started under the chairmanship of my predecessor, my noble friend Lord Gilbert. It is something that I have been pleased to take a very active involvement in, and I am very pleased to support it passing.

As we think about what this Bill is trying to achieve and why, it is worth also remembering why we in the UK are forging a different path from the ones that Europe and the US are on. In the last few days, we have seen the US DoJ launch a major anti-trust lawsuit against Apple. In the EU, the Commission is taking serious measures against some of the big tech firms to make them comply with the spirit and letter of its new Digital Markets Act. Both situations have an ominous sense of being exactly the kind of lengthy legal battles that favour big tech, which we are trying to avoid.

The House has rightly voted on a number of measures to try to ensure that our regulation can work as it is meant to, in a timely, proportionate and less confrontational manner. That is what the Government are seeking to do with this legislation.

As the Bill leaves here and enters its final stage, I emphasise two measures from among the amendments passed by this House. First, the deadline for the Secretary of State to approve CMA guidance is key in keeping things on track and avoiding concerning delays. Secondly, if the Government and the Commons cannot accept the amendments to revert the appeals process on fines back to JR standard, I hope that my noble friends within government will consider putting a clarification in the Bill that the appeals process on fines cannot be changed in ways that undermine the JR standard or open up avenues for more expansive and protracted legal challenge.

That aside, I am grateful to the Government for bringing forward this important legislation. It will mark out our regulatory regime as different from those in other parts of the world that are having such a big impact—and not necessarily in good ways.

Lord Clement-Jones Portrait Lord Clement-Jones (LD)
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My Lords, it is a pleasure to follow the noble Baroness, Lady Stowell. I agree with a huge amount of what she said.

I reiterate the welcome that we on these Benches gave to the Bill at Second Reading. We believe it is vital to tackle the dominance of big tech and to enhance the powers of our competition regulators to tackle it, in particular through the new flexible pro-competition powers and the ability to act ex ante and on an interim basis.

We were of the view, and still are, that the Bill needs strengthening in a number of respects. We have been particularly concerned about the countervailing benefits exemption under Clause 29. This must not be used by big tech as a major loophole to avoid regulatory action. A number of other aspects were inserted into the Bill on Report in the Commons about appeals standards and proportionality. During the passage of the Bill, we added a fourth amendment to ensure that the Secretary of State’s power to approve CMA guidance will not unduly delay the regime coming into effect.

As the noble Baroness, Lady Stowell, said, we are already seeing big tech take an aggressive approach to the EU Digital Markets Act. We therefore believe the Bill needs to be more robust in this respect. In this light, it is essential to retain the four key amendments passed on Report and that they are not reversed through ping-pong when the Bill returns to the Commons.

I thank both Ministers and the Bill team. They have shown great flexibility in a number of other areas, such as online trading standards powers, fake reviews, drip pricing, litigation, funding, cooling-off periods, subscriptions and, above all, press ownership, as we have seen today. They have been assiduous in their correspondence throughout the passage of the Bill, and I thank them very much for that, but in the crucial area of digital markets we have seen no signs of movement. This is regrettable and gives the impression that the Government are unwilling to move because of pressure from big tech. If the Government want to dispel that impression, they should agree with these amendments, which passed with such strong cross-party support on Report.

In closing, I thank a number of outside organisations that have been so helpful during the passage of the Bill—in particular, the Coalition for App Fairness, the Public Interest News Foundation, Which?, Preiskel & Co, Foxglove, the Open Markets Institute and the News Media Association. I also thank Sarah Pughe and Mohamed-Ali Souidi in our own Whips’ Office. Last, but certainly not least, I thank my noble friend Lord Fox for his support and—how shall I put it?—his interoperability.

Given the coalition of interest that has been steadily building across the House during the debates on the Online Safety Bill and now this Bill, I thank all noble Lords on other Benches who have made common cause and, consequently, had such a positive impact on the passage of this Bill. As with the Online Safety Act, this has been a real collaborative effort in a very complex area.

Baroness Jones of Whitchurch Portrait Baroness Jones of Whitchurch (Lab)
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My Lords, before the Bill passes, I put on record my thanks to the Ministers—the noble Viscount, Lord Camrose, and the noble Lord, Lord Offord—as well as the noble Lord, Lord Parkinson, who made a guest appearance. I also put on record my huge appreciation for the Bill team for their timely letters and briefings, and their immense good humour when we asked for even more information.

The whole experience has been a good illustration that, when we fully engage in discussion on a Bill, we can deliver genuine improvements that have broad support. I hope that our colleagues in the Commons appreciate the careful thought and hard work that is behind these changes. I hope that we do not have to be here again on this Bill, but I reiterate that our door is always open if further discussions would help. For now, I hope that the Bill will soon be on the statute book and I look forward to its progress.

Bill passed and returned to the Commons with amendments.

Israel and Gaza

Tuesday 26th March 2024

(4 months ago)

Lords Chamber
Read Full debate Read Hansard Text Read Debate Ministerial Extracts
Statement
16:26
Lord Ahmad of Wimbledon Portrait The Minister of State, Foreign, Commonwealth and Development Office (Lord Ahmad of Wimbledon) (Con)
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My Lords, with the leave of the House, I shall now repeat a Statement given in another place by my right honourable friend the Minister for Development and Africa. It reads as follows:

“As the House knows, the United Kingdom has long been calling for an immediate humanitarian pause leading to a sustainable ceasefire without a return to destruction, fighting and loss of life. This would allow for the safe release of hostages and for more aid to reach Gaza.

Yesterday, the international community took a significant step towards achieving that. We welcome yesterday’s UN Security Council resolution, which reflected widespread international support for the UK’s position and considerable efforts by our diplomats to secure consensus. Mr Speaker, this is an issue that can polarise and divide, but yesterday in New York there was a shared sense of purpose. I am sure the whole House would agree that we must capitalise on this moment.

We want to see an immediate, sustained humanitarian pause, which would allow for the safe release of hostages and more aid to reach Gaza. That is what yesterday’s resolution called for, why the United Kingdom voted ‘yes’ on this text and why the Government are now focused on seeing the resolution implemented as quickly as possible. This resolution sets out the urgent demand for the

‘unconditional release of all hostages’.

Hamas must act on this now. It was wrong to kidnap them on 7 October, it has been wrong to hold them in captivity for so long and it is wrong to hold them any longer. We strongly support the intensive diplomatic efforts by Egypt, Qatar and the United States to secure their release.

My right honourable friend the Prime Minister and my noble friend the Foreign Secretary have both met, as I have, with families of hostages and reiterated to them personally our desire to see their loved ones freed and their agony brought to an end. We urge all sides to seize the opportunity and engage with negotiations to reach an agreement as soon as possible. Now is not the time to turn away from talks; now is the time to bring these talks to a conclusion. The resolution also sends a clear message on the need for all parties to the conflict to uphold international humanitarian law and for the delivery of aid to be scaled up urgently. This requires lifting all barriers impeding its delivery.

Palestinian civilians face a devastating and growing humanitarian crisis in Gaza. The Prime Minister and Foreign Secretary continue to reiterate these messages in their contacts with the Israeli Government, and the Government are exploring every avenue to deliver aid by land, sea and air. Last week, enough aid to feed over a quarter of a million people was delivered by land from Jordan. Britain is fully involved in the international effort to set up a maritime corridor for aid into Gaza. Yesterday, the first air drop of UK aid by the Royal Air Force, with the support of Jordan, took place.

We regret that this resolution did not condemn the abhorrent and brutal terrorist attacks perpetrated by Hamas on 7 October. The UK condemns these attacks unequivocally. We have been forthright in speaking up for Israel’s right to defend itself and ensure that such an attack can never happen again. We want Israelis and Palestinians alike to live in peace and security. An immediate humanitarian pause, leading to a sustainable ceasefire, is the best way to achieve a lasting peace.

We continue to work on the other core elements required for such a process to succeed. We have supported the formation of a new Palestinian Government for the West Bank and Gaza under the leadership of Prime Minister Mustafa. An international support package is vital for building on Prime Minister Mustafa’s appointment. We also want to see the removal of Hamas’s capacity to launch attacks against Israel. Hamas can no longer remain in charge of Gaza. Finally, we need to offer a political horizon to the Palestinians that provides a credible and irreversible pathway towards a two-state solution of Israel and Palestine living side by side in peace and security.

The resolution passed by the Security Council yesterday does not guarantee this outcome, but it is a significant step forward. The Government will spare no effort in building on this opportunity. We want to create irreversible momentum towards a lasting peace. I commend this Statement to the House”.

16:31
Baroness Smith of Basildon Portrait Baroness Smith of Basildon (Lab)
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My Lords, I thank the noble Lord, Lord Ahmad of Wimbledon, for repeating today’s Statement. I reiterate that we recognise and appreciate his work, and the work of his ministerial and diplomatic colleagues.

I am sure the Minister will agree that it has been hard to be optimistic in recent weeks, as hostages remain under the control of Hamas and vast swathes of Gaza edge towards man-made preventable famine. The images we see on our TV screens and in the newspapers every day are no less harrowing today than they have been for many months. We must not allow the familiarity of that to lessen our sense of urgency in dealing with the ongoing conflict. Given the unimaginable suffering on both sides, it has been deeply disappointing that successive rounds of negotiations have broken up without agreement, and that the UN Security Council had previously been unable to achieve a consensus on a way forward. We therefore strongly welcome the passing of UN Security Council Resolution 2728 yesterday. The Minister’s comment about that shared sense of purpose is a significant one.

We welcome the Government’s change from abstention on other resolutions to support for this one, and recognise the significance of an abstention from the United States. We also acknowledge the Government’s statement of support for Prime Minister Mohammad Mustafa, who we hope the international community will do everything possible to support, and their commitment to doing what they can to ensure that this resolution is implemented in full. For this to be realised, and for the resolution to become a genuine and meaningful turning point, it means Hamas laying down its arms and releasing all the hostages, and Israel abiding by international calls to drastically scale up humanitarian aid.

I will follow up on questions that were raised in the other place this afternoon. MPs across the House of Commons, from all sides, asked the Minister whether the Government consider that the UN Security Council resolution is binding, and what implications this may have if its terms are not implemented. Is the Minister able to say some more on that, and outline his views on that today?

We accept that the Government want to see the resolution, including the ceasefire, succeed, but we are also trying to understand how the world responds if that is not the case. Regarding UNRWA, Minister Mitchell noted that the interim report is currently with the UN Secretary-General, and suggested that an update may be available later today. As the Shadow Foreign Secretary noted, one of the biggest issues faced by the civilians of Gaza is the distribution of the already limited aid that does get in.

We were all appalled, rightly, by the allegations against some UNRWA staff. Nevertheless, that body is best placed to ensure that finite supplies of water, food and fuel get to where they are needed most, and as quickly as possible. Can the Minister provide any updates on the UN’s work in this area and the Government’s response to it?

A further issue, raised earlier, is the advice on arms exports given to the Business Secretary by the Foreign Office. Did either department receive legal advice on the potential use of UK arms that would contravene international law? The Government have so far maintained the usual position that legal advice is not shared, and we understand that. But the Minister will be aware that summaries of advice have been published on many occasions. Most recently, he will be aware, each round of UK air strikes against Houthi rebels in Yemen has been preceded by a statement providing a summary of the legal advice. I wonder whether he has given thought to whether that could potentially be a model for the type of material that could be placed in the public domain on this occasion.

The Statement also referred to yesterday’s RAF aid drop over Gaza. The Minister said that the UK is contributing to aid initiatives, including participating in air drops co-ordinated by Jordan, but I think that this is the first time an RAF plane has been used for this purpose. Can the Minister confirm whether the Government are expecting to authorise further missions as part of an ongoing international effort to prevent catastrophic famine?

Finally, as the Minister concluded, we all recognise that the UN Security Council resolution does not guarantee peace, but its significance cannot be underestimated. It is a sign of the international community coming together, and we hope that it will be an important step towards ending the conflict and towards a lasting peace.

Lord Newby Portrait Lord Newby (LD)
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My Lords, I too thank the Minister for repeating the Statement. As the House is aware, we on these Benches have been calling for an immediate bilateral ceasefire for a number of months. We welcome the resolution passed by the UN Security Council. Does the Minister agree that we need something more than a temporary ceasefire? We need to work to achieve a more permanent ceasefire, so that we can begin to move towards the reconstruction and political processes that are now so desperately needed.

We, like everybody else, are extremely concerned about the immense, and growing, humanitarian catastrophe in Gaza. Latest figures from the IPC, for example, show that more than half of all Palestinians in Gaza—some 1.1 million people—have completely exhausted their food supplies—just think of that. We of course welcome the fact that yesterday, for the first time, the RAF started dropping food supplies directly to civilians in Gaza, but that is, at best, a partial solution. What pressure have the UK Government put on Israel, and specifically the Coordinator of Government Activities in the Territories—which is run by Israel—to facilitate aid into Gaza to allow an increased flow of vehicles and supplies across the Israel-Gaza border?

We welcome the recent sanction of four Israeli settlers who have committed human rights abuses against Palestinian communities in the West Bank, making peace harder to achieve. Will the Government go beyond this and now sanction all violent settlers, along with National Security Minister Ben-Gvir, Finance Minister Smotrich and all the violent settler movement’s connected entities?

Israel has agreed to a US proposal on a prisoner-hostage exchange that would release about 700 Palestinian prisoners—among them 100 serving life sentences for killing Israelis—in exchange for the release of 40 Israeli hostages held by Hamas in Gaza. Once again, Hamas has rejected it, saying that “issues remain unresolved”. An essential step to ending this conflict is the unconditional release of all hostages held by Hamas in Gaza. Will the Minister commit to using all his best efforts to urge the Qataris to require Hamas to release all the hostages, starting with these 40, about whom there appears to be a nascent agreement?

Earlier this month, my right honourable friend the Member for Kingston and Surbiton wrote to the Foreign Secretary, asking him to write to the International Criminal Court to ask it to issue international arrest warrants for Hamas terrorists involved in planning the 7 October attacks. Can the Minister commit to doing this?

The UN resolution is a welcome development, but in itself it will achieve little on the ground immediately. What we need now, as we have done for many weeks, is for all the parties to put in place the ceasefire that is so long overdue and so urgently needed.

Lord Ahmad of Wimbledon Portrait Lord Ahmad of Wimbledon (Con)
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My Lords, I thank the noble Baroness, Lady Smith, and the noble Lord, Lord Newby, for their support. Indeed, I thank many noble Lords who have kept the focus on this issue—the need for hostages to be released unconditionally—since the horrific events of 7 October. We see the continuing situation in Gaza unravel and the humanitarian catastrophe. It is very much on the brink. We debated the IPC report, with its real, clear warning signals about May. As I said from the Dispatch Box then, we agree totally with the recommendations about increasing humanitarian aid. I know that view is shared across the House.

In this respect, the noble Lord, Lord Newby, asked about COGAT specifically. We are working very closely with COGAT. Earlier today, I had my regular briefing with our humanitarian co-ordinator about specific numbers. We are watching this on a daily basis. While there has been an improvement from the representations we have made directly to Israel—we are talking about 200-plus trucks now—there is a need to scale this up massively. Indeed, Israel itself has stated the need to flood aid into Gaza. We were the first to call out the need for the Kerem Shalom crossing to be fully operational, and other crossings, particularly into the northern part of Gaza. We have repeatedly called for the opening of Ashdod port. We are working with close partners on this and engaging quite directly, not just with near neighbours but with other countries that are supporting the humanitarian effort directly on the ground, and, indeed, the UN.

The noble Baroness and the noble Lord asked about Hamas and hostages. I say again very clearly: Hamas could end this now by releasing the hostages unconditionally, and we could move forward on ensuring that aid reaches the people suffering in Gaza. I have met repeatedly with several of the hostages’ families. Their pain is incredible but their courage is equally so. Their advocacy for their loved ones and to bring closure to their suffering is something the Government are fully seized of.

We are also very much focused on the suffering of the Palestinians, when we see the number of people, including women and children, killed in this war. It is important that we bring this to a conclusion. That is why we welcome and thank both the noble Lord and the noble Baroness for their support of the Government’s vote at the UN Security Council. A lot of people do not see the heavy lifting involved in the diplomatic effort. I pay tribute to our ambassador, Dame Barbara Woodward, and her team. I assure noble Lords that it went down to the wire, with changes on words and language, but we recognise the shift in the United States’s position, which was important in allowing this resolution to pass. We now ask for full compliance—the noble Baroness and the noble Lord referred to this—to ensure that we can, vitally, get the hostages out and aid to enter.

The noble Baroness and the noble Lord both asked about our engagement on the agreement, which still has not been finalised. We pay tribute to Qatar and Egypt, and to the United States. I am travelling to Egypt tomorrow. We are engaged with all sides on this. We are engaging directly with the Qataris as well as with the United States, because these are important first steps: to get the hostages out and the aid in.

The noble Baroness asked about UNRWA and the update on the interim report. This is a verbal report and briefing. There has been some media reporting on it but the final report will be presented to the Secretary-General on 20 April. We have been very clear about UNRWA and I believe the noble Baroness agrees with the Government’s position—which is shared by the Official Opposition—about the important role that UNRWA has played historically, not just in Gaza but in other near-neighbouring countries in providing support. Equally, the shocking reports we received which led to pausing future funding for UNRWA said that there were people involved with Hamas directly. We recognise the importance of mitigations being in place and look forward to the interim report.

We have not stopped our support, and over £100 million has now gone into Gaza. We are working with key agencies such as the World Food Programme and UNICEF to ensure that aid continues to reach Gaza. However, there is a challenge regarding the number of trucks going in. We have talked about maritime and air aid but anyone who has been to those border points —like my noble friend the Foreign Secretary and I—knows that the only way is through the land borders, which is why we continue to press that.

The noble Baroness asked about UN Security Council Resolution 2728—it is binding. The United Kingdom’s place is clear. Clarifications were provided on this. She asked about the RAF drop and I can confirm it was the first time. It was not the first time that UK aid was delivered, but working with the Jordanians we provide an RAF plane which has helped in this aid drop and is part of an ongoing programme. I add again that air drops cannot replace what is required through the land borders. The noble Baroness asked about arms exports and related legal advice. She is, of course, correct that it is for the Government to review that but I assure her that, as she is aware, our arms export licences are robust. On adherence to IHL, we keep this constantly under review.

The noble Lord asked about sanctions against settlers. We did act and while I cannot comment about future policy, the Government know this and have it available as a tool. I condemn—as I have done, and do so unequivocally—the comments from Mr Smotrich and Mr Ben-Gvir in relation to the Palestinians. I assure the noble Lord that they are no way reflected by many friends and people across Israel and the citizens of Israel. We need to ensure that the only way possible of reaching a lasting sustainable peace is through that two- state solution. That is why it is one of the Government’s focuses and priorities. He also asked about the ICC and writing, et cetera. I will take that back but I know the prosecutor at the ICC has visited both Israel and the West Bank and is very much focused on the situation as it is currently unravelling.

I thank both Front Benches for their support of the Government’s position. I know the leader of the Liberal Democrats recently visited the region as well. I assure noble Lords, as I have done before, particularly on the Front Benches, that we will continue to engage quite directly to ensure that the context of the situation on the ground is well understood. Equally, I respect the fact that many of us are very much on the same page and, irrespective of where we are coming to on this issue, we are all agreed that the hostages must be released now unconditionally, and at the same time we must see humanitarian, life-saving aid going into Gaza to relieve the suffering so we can take that vital step as assured by the UN Security Council resolution.

16:49
Lord Austin of Dudley Portrait Lord Austin of Dudley (Non-Afl)
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My Lords, will the Minister confirm that aid is being admitted into Gaza by the Israelis more quickly than the UN and the other agencies can distribute it? One day last week, for example, 222 trucks were admitted but only 158 were distributed and only 86 of those by the UN, so the barrier is not Israel admitting aid into Gaza. Furthermore, can he explain to the House how it is possible for him to say that the Government support Israel’s right to defend itself but then for them to threaten to withhold arms exports on which that defence may depend?

Lord Ahmad of Wimbledon Portrait Lord Ahmad of Wimbledon (Con)
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On the noble Lord’s second point, about threatening to withhold arms exports, I do not believe I have said that. On his earlier point, I am sorry, but I do not agree with him. As we have seen directly through the exchanges we have had with COGAT, there has been a real challenge. British trucks with British aid have been waiting on the borders of Gaza. He quoted the numbers; I quoted greater numbers than he did. We have seen a change—an uptick, but it is a small uptick—in the number of trucks entering; perhaps he has not visited to see the backlog of trucks. Let us be clear what has happened in Gaza. There is no infrastructure. The UN itself is not getting the visas it needs. The noble Lord shakes his head, but this is fact. We have been lobbying on this and this is our advocacy.

We have a very strong relationship with Israel. When Mr Gantz visited London, the Foreign Secretary and I made clear the importance of this issue, and Israel recognises its responsibilities. It is a democracy and it has international obligations, including adherence to international humanitarian law. Because of the advocacy of countries such as the United Kingdom, we see that there has been some movement. We have seen an increase in aid going in, but this is not enough. We have looked in detail at the 500 or 600 trucks. Let us also be clear: certain produce was produced in Gaza and that is no longer happening. What is needed right now, as the report we discussed only a few days ago made clear, is to avert a humanitarian famine, and Israel has an important role to play in this.

Baroness Deech Portrait Baroness Deech (CB)
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My Lords, does the Minister appreciate that the Security Council has turned into a completely dysfunctional organisation? It rejected a resolution a couple of days ago that would have linked the release of the hostages to a ceasefire. It turned that down. This time, the two conditions are not linked, and they are not enforceable. It is no more possible to enforce the release of hostages than it is to enforce a ceasefire against Hamas, which was not mentioned in that resolution. Will the Minister push for the Red Cross to be allowed to visit the hostages and for the hostages to be released first? Will he also note that the news we are getting from Gaza is almost totally unreliable, because so much of it comes from journalists who are controlled by or in the pocket of Hamas? Will he focus on the hostages? I am sad to say how empty is that phrase: never again.

Lord Ahmad of Wimbledon Portrait Lord Ahmad of Wimbledon (Con)
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My Lords, I am sad to say that I disagree with the noble Baroness. First, of course I am focused on the hostages. I have met with the relatives of hostages not once, twice or three times, but several times over. In my Statement, I spoke about the importance of recognising their suffering. I met with a hostage’s mother only last week, as did the Foreign Secretary. The premise of saying that we are not focused on the hostages, frankly, does not add up.

Secondly, I do not agree with the noble Baroness’s assessment of the UN Security Council. Yes, it has been challenging but what we saw yesterday was the Security Council coming together. On her earlier point, let me read from the Security Council resolution, which I have in front of me. It refers to:

“Acknowledging the ongoing diplomatic efforts by Egypt, Qatar and the United States, aimed at reaching a cessation of hostilities, releasing the hostages and increasing the provision and distribution of humanitarian aid”.


It contains three provisions. The first:

“Demands an immediate ceasefire for the month of Ramadan respected by all parties leading to a … sustainable ceasefire, and also demands the immediate and unconditional release of … hostages, as well as ensuring humanitarian access”.


I invite the noble Baroness and noble Lords to read the resolution, which is very clear.

Lord Swire Portrait Lord Swire (Con)
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I wonder if my noble friend the Minister has seen the reports that some settler groups, I think mainly in the United States, are now parcelling up bits of Gaza and selling them off. If there is any truth to these reports, what would his comments be? Secretary of State Blinken has been rather ahead of the British Government in condemning the activities of illegal settlers, describing them as illegal under international law, whereas we have sanctioned named settlers. Can we expect to move closer to the American position on this? If these settlers are being encouraged illegally by the Netanyahu Government, why do we continue to sell them arms?

Lord Ahmad of Wimbledon Portrait Lord Ahmad of Wimbledon (Con)
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My Lords, I assure my noble friend that we work very closely with the United States. As I have said before, and as my noble friend has repeated, it has been a consistent position of every Government I can remember that settlements in the West Bank and Gaza are illegal and against international law. I have alluded to the issue of our own arms exports and the importance of Israel’s adherence to international humanitarian law.

Baroness Blower Portrait Baroness Blower (Lab)
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My Lords, aid agencies have reported that the list of goods allowed by the Israeli Government into Gaza is hard to access and subject to change without warning. Can the Minister say whether any diplomatic initiatives have been taken to put pressure on the Israeli Government to publish an official list of what is allowed in, and to make sure that it covers all the clear nutrition, food and medical requirements in this situation?

Lord Ahmad of Wimbledon Portrait Lord Ahmad of Wimbledon (Con)
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My Lords, I assure the noble Baroness that in all our direct interactions with Israel, we make the case for ensuring clarity on what is allowed. In the warehouses near Al Arish that I visited with the Foreign Secretary, I saw for myself goods rejected under the banner of dual purpose. We asked for clarity, and we will continue to do so. That is why it was important to appoint a co-ordinator, who is doing an excellent job in establishing real clarity on what is allowed in. We are working with key agencies on the ground and ensuring that the acute needs are directly met. There is an immediate need for basic foods and medicines to enter Gaza, and we are making that case very clearly to Israel.

Let me say again that the United Kingdom, rightly, is a friend to many countries, including Israel. Being a friend means standing with Israel, as we did—this House stood together—when those horrific events unfolded on 7 October. I have said that on that day—it is perhaps reflective of the period we are in, from an Abrahamic perspective—I made three calls to Israel. One call was to a friend of mine who is Muslim, in Israel. The second was to a friend who is Jewish, in Israel. The third was to the Christian Archbishop Hosam, in Jerusalem. Why? Because this is a common cause of our common humanity. Israel is a country which is a democracy, and we recognise it as a friend. But it is also important, on the other side of the coin, that we challenge and present constructive advocacy and bring a lasting solution to this conflict. We would all agree, irrespective of the angle we come at it from, that this conflict has gone on for too long and has cost far too many lives.

Baroness Gohir Portrait Baroness Gohir (CB)
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My Lords, a report stated that famine was imminent. That was 10 days ago, so Gaza is experiencing famine right now. The Minister gave examples of aid that is getting through, which is only a fraction of what is needed, because the Israeli Government are constantly putting barriers in the way. The Minister stated that now, the Israeli Government want to flood Gaza with aid. Are those just words? Will the Minister acknowledge that the Israeli Government are responsible for the mass starvation of Palestinians?

Lord Ahmad of Wimbledon Portrait Lord Ahmad of Wimbledon (Con)
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My Lords, I alluded earlier to the report from the IPC. That is why we are working around the clock to ensure that we make the point to Israel about humanitarian access, which, as I said before, we made in our last meeting with Minister Gantz. The need to deliver humanitarian aid was clear and accepted; that is why we persist on this. I have also acknowledged that there has been an uptick in the number of trucks going in—a greater number compared to last month. Still, this is not enough. It is important that we see the kind of aid going in. A ceasefire is coming into place for the period of Ramadan, but we need it to be sustainable and, ultimately, for the reconstruction that is so desperately needed to begin, so that people can start rebuilding their lives.

Lord Grocott Portrait Lord Grocott (Lab)
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My Lords, given that we all described—quite rightly in my view—the dreadful attack in southern Israel resulting in the deaths of 1,200 people as “slaughter”, what language is left to describe the deaths in Gaza of 33,000 Palestinians, including 13,500 children and babies? How do we describe that? Is killing on that scale consistent with Israel’s right, which we all respect, to self-defence? Is it necessary? In view of international humanitarian law, is killing on that scale in Gaza, and the horror that is Gaza today, a proportionate response by Israel?

Lord Ahmad of Wimbledon Portrait Lord Ahmad of Wimbledon (Con)
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My Lords, of course, any person who has been killed in this conflict or any other is tragedy beyond belief. The number of people that have been killed in Gaza is shocking. What happened on 7 October was shocking. We see innocent civilians who have been impacted, whether the hostage families or the thousands of people who have been killed in Gaza. This is a human tragedy; I have described it as a catastrophe in every sense.

That is why it needs all nobly intentioned countries to come together and act as one. We need to make sure the resolutions that have been passed by the Security Council are fully implemented. This is not the first one; Resolution 2720 was passed on humanitarian access specifically. Hamas is different from Israel: we expect Israel to adhere to IHL; Hamas is a terrorist organisation. We are talking about two very different entities. That is why we will never give up hope and will continue our strong advocacy and work with key partners to ensure we can bring this tragic conflict to an end. I am sure the noble Lord, like us all, acknowledges that the loss of any innocent life is a tragedy beyond belief, and we have seen far too many people killed in this conflict.

Lord Grade of Yarmouth Portrait Lord Grade of Yarmouth (Non-Afl)
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Can the Minister share with the House any information he has about the level remaining in Gaza of active, armed Hamas rocket launchers and armed terrorists, if I can use that word? It appears that Israel has not yet achieved its objective—leaving aside the rights and wrongs of how it is doing it. Is there still a considerable Hamas resistance remaining in Gaza?

Lord Ahmad of Wimbledon Portrait Lord Ahmad of Wimbledon (Con)
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My noble friend raises an important question. We have seen a continuation, from different parts, of Hamas’s capacity to launch attacks against Israel. That is why, as in the key deliverables that my noble friend the Foreign Secretary has highlighted, we need this fighting to stop. First, this resolution can achieve that. Secondly, it means we get the hostages out and aid in. Thirdly, it ensures Hamas is no longer in control or has the capacity to launch attacks against Israel. Fourthly, we can work with a reformed PA that is in control over the West Bank and Gaza towards what should ultimately be our noble goal—an attainable two-state solution. Hamas is a terrorist organisation in the UK’s view. Hamas could end this now. It could put down its weapons, give up the hostages and agree a pathway to peace. Are we at that juncture with Hamas right now? No.

Lord Craig of Radley Portrait Lord Craig of Radley (CB)
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My Lords, in the hope that we get a cessation of hostilities, what assessment have His Majesty’s Government made of the attitude of the Houthis and whether they will also observe a ceasefire?

Lord Ahmad of Wimbledon Portrait Lord Ahmad of Wimbledon (Con)
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My Lords, on the situation with the Houthis, the UK has taken the principled stand that they have sought indiscriminately to attack and disrupt international commercial shipping. Close to 20% of international commercial shipping went through those channels in the Red Sea, which is why the UK’s response has been robust. We have heard the public declarations by the Houthis. Prior to 7 October, they had started negotiating with the Kingdom of Saudi Arabia a ceasefire and a solution to Yemen. We have not lost sight of that—we continue to be engaged on that brief—but the Houthis’ actions do not reflect their words. If they are true to their words, they will cease—if indeed the ceasefire happens. I am not currently holding out hope for that—let us wait.

Lord Turnberg Portrait Lord Turnberg (Lab)
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My Lords, I am sure the noble Lord will remember that Golda Meir said that, if the Arabs put down their arms, there would be no war, but, if Israel put down its arms, there would be no Israel. Is it not perverse to suggest that we stop providing arms to Israel, the victim of that horrendous attack, which is trying to defend itself against further similar attacks?

Lord Ahmad of Wimbledon Portrait Lord Ahmad of Wimbledon (Con)
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My Lords, going back to what I said earlier, I do not believe that I or the Foreign Secretary have suggested that. We have stood with Israel, in terms of its security concerns, over many years—well before 7 October. Israel is a partner to the United Kingdom, but, as many recognise in Israel itself and as we are saying directly to Israel, being a friend and partner also means that we need this fighting to stop for the sake of the hostages. To get the hostages out, the fighting must stop, which will also allow the aid in. On Golda Meir, I recently saw the film made about her. One thing is prevalent in all this, and in how she made peace with Anwar Sadat: the only prevailing sustainable solution is a pathway to peace.

Lord Bishop of Leeds Portrait The Lord Bishop of Leeds
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My Lords, given that UN resolutions are not always seen through, as it were, or observed, is the Minister optimistic that this resolution will have the impact we want it to have? What impact will it have on countries like Russia, China and Iran continuing to supply weapons?

Lord Ahmad of Wimbledon Portrait Lord Ahmad of Wimbledon (Con)
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This is an important first step in the diplomacy. There has been an incredible challenge at the United Nations Security Council in getting an agreed form of words. There was a resolution about a week ago which was rejected and vetoed by Russia and China. In front of us now is an important first step in recognising that the release of hostages is necessary for a peaceful resolution.